10 Questions
What is business risk primarily associated with?
The variability in a company's income over time
Which type of companies typically experience relatively stable income patterns?
Utility companies
What is financial risk tied to?
A company's fixed costs
What is the contribution margin ratio?
Contribution margin as a percentage of sales
What does the Degree of Operating Leverage (DOL) measure?
Whether a company's variable or fixed costs are higher
What is the purpose of the Degree of Operating Leverage (DOL)?
To quantify a company's operating risk
What is the formula for calculating the contribution margin?
CM = Sales - Variable Costs
Which type of costs allow a company to adjust its operating costs?
Variable costs
What increases a company's operating risk?
A higher proportion of fixed costs
What is the formula for calculating the Degree of Operating Leverage (DOL) not provided in the text?
The formula for DOL is not mentioned in the text
Learn about the common definition of risk in investment projects and how it can have both positive and negative effects. Discover the importance of considering risks with potential positive impacts for smarter and more profitable investment decisions.
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