The Degree of Pretax Cash Flow Operating Leverage Provides Us

question 43

Multiple Choice

The degree of pretax cash flow operating leverage provides us with

• A) a measure of how sensitive pretax operating cash flows are to changes in revenue.
• B) a measure of how sensitive accounting operating profits are to changes in revenue.
• C) a measure of how sensitive NOPAT is to changes in revenue.
• D) none of the above.

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Definitions:

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, essentially a measure of producer benefit.

Demand Curve

A graph that shows the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Supply Curve

A graphical representation showing the relationship between the price of a good and the amount of it that suppliers are willing to produce.

Actual Price

The price at which goods or services are sold in the market, as opposed to theoretical or listed prices.