Asked by
Anna-Vhic Aquino-Serrano
on Dec 01, 2024
Verified
The use of fixed cost sources of funds, such as debt and preferred stock, affect a firm's:
A) financial risk.
B) degree of operating leverage.
C) market power.
D) business risk.
Fixed Cost Sources
Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.
Financial Risk
The chance of incurring financial losses from an investment or business activity.
Operating Leverage
A measure that shows how revenue growth translates into growth in operating income, highlighting the impact of fixed costs.
- Understand the consequences of utilizing fixed-cost financing and the concept of financial leverage.
- Discern the relationship involving operating and financial leverage in the context of a business's success.
Verified Answer
KJ
Learning Objectives
- Understand the consequences of utilizing fixed-cost financing and the concept of financial leverage.
- Discern the relationship involving operating and financial leverage in the context of a business's success.