The Higher a Project's Operating Leverage, _________________

question 55

Multiple Choice

The higher a project's operating leverage, _________________.

• A) The lower the sensitivity of EBIT to changes in revenue.
• B) The greater the sensitivity of EBITDA to changes in revenue.
• C) The lower the sensitivity of net profit to changes in variable costs.
• D) The greater the sensitivity of net profit to changes in variable costs.

Determine the least squares estimates of the slope and intercept in linear regression.

Interpret the significance of regression coefficients using the t statistic.

Understand and calculate the coefficient of determination and its significance.

Predict values using the regression equation and point estimates.

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Definitions:

Margin of Safety

An accounting metric indicating how much sales can decline before a business reaches its breakeven point, measuring operational risk.

Volume of Sales

The total quantity of goods or services sold by a business within a specific time period, which can indicate the company's level of activity and market reach.

Break-even Point

The quantity of sales at which total revenues equal total costs, resulting in no net profit or loss.

Cost-volume-profit Chart

A graphical representation that shows the relationship between a company's costs, sales volume, and profit.