The Presence of Association Between Two Variables Does Not Necessarily

question 10

Multiple Choice

The presence of association between two variables does not necessarily imply causation for the following reason(s) :

• A) the association between two variables may result simply from pure chance
• B) the association between two variables may be the result of the influence of a third common factor
• C) both variables may be the cause and the effect at the same time
• D) a and b
• E) a,b,and c

Calculate the degree of operating leverage and interpret its effects on a company’s operating income.

Assess the impact of changes in variable costs and sales volume on net operating income.

Determine the margin of safety in both dollar terms and as a percentage.

Analyze the effects of a change in sales mix on the break-even point and net operating income.

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Definitions:

Unrecoverable Cost

Expenses that have been incurred and cannot be recovered or refunded, also known as sunk costs.

Cash Flows

The total amount of money being transferred into and out of a business, project, or financial product.

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation used for tax purposes in the United States to recover the cost of tangible property over its useful life.

Cost of Capital

The average rate of return a company must pay to its security holders to fund its assets, integrating the cost of debt and equity.