Which of the Following Statements Is CORRECT? as a Firm

question 34

Multiple Choice

Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output,this

• A) normally leads to an increase in its fixed assets turnover ratio.
• B) normally leads to a decrease in its business risk.
• C) normally leads to a decrease in the standard deviation of its expected EBIT.
• D) normally leads to a decrease in the variability of its expected EPS.
• E) normally leads to a reduction in its fixed assets turnover ratio.

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Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest of previous periods on a quarterly basis.

Compound Interest

The interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Present Value

The assessed current value of a future monetary amount or series of financial flows, at a given rate of return.

Compound Interest

Refers to the addition of interest to the principal sum of a loan or deposit, where the added interest also earns interest from then on. This effect makes a sum grow at a faster rate compared to simple interest, which is calculated only on the principal amount.