Which One of the Following Statements Is NOT Correct

question 74

Multiple Choice

Which one of the following statements is NOT correct?

• A) A leveraged company is more sensitive to changes in its revenue income than a company that is not leveraged.
• B) A leveraged company is more risky than a company that is not leveraged.
• C) A company that uses debt magnifies the return to its shareholders.
• D) An all-equity company has no risk.

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities related to production.

Production Orders

Instructions or commands produced to initiate the manufacture of a specific quantity of goods at a specified time.

Activity-Based Costing

A costing method that allocates overhead and indirect costs to specific activities, providing more accurate product costing.

Direct Labor Rate

The cost of the work done by those employees who directly manufacture the products, usually measured per hour.