A Firm Has an Operating Leverage Factor of 4

question 5

Multiple Choice

A firm has an operating leverage factor of 4. This means that

• A) if sales revenue increased by 2 per cent, profit would increase by 4 per cent.
• B) if sales revenue increased by 2 per cent, profit would increase by 8 per cent.
• C) if sales revenue increased by 2 per cent, profit would increase by 2 per cent.
• D) profit would increase by 4 times the dollar increase in sales revenue.

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Definitions:

Limbic System

A complex system of nerves and networks in the brain, involving several areas near the edge of the cortex concerned with instinct and mood.

Autonomic Nervous System

The part of the peripheral nervous system that controls involuntary bodily functions, including heart rate, digestion, respiratory rate, pupillary response, urination, and sexual arousal.

Somatic Nervous System

A part of the peripheral nervous system associated with voluntary control of body movements via skeletal muscles.

Midbrain

A central part of the brainstem involved in vision, hearing, motor control, sleep/wake, arousal, and temperature regulation.