Match the following : List – IList – II I. The presence of fixed cost in the cost structure of a firm.…
I. The presence of fixed operating costs in a firm's cost structure gives rise to Operating leverage (2); II. The presence of fixed-return funds (debt and preference…
Choose your answer
Match the following :
| List – I | List – II |
|---|---|
| I. The presence of fixed cost in the cost structure of a firm. | 1. Super-leverage |
| II. The presence of fixed return funds in the capital structure of a firm. | 2. Operating leverage |
| III. Impact of changes in sales on the earnings available to shareholders. | 3. Financial leverage |
Answer and explanation
Correct answer B
I. The presence of fixed operating costs in a firm's cost structure gives rise to Operating leverage (2); II. The presence of fixed-return funds (debt and preference capital) in the capital structure gives rise to Financial leverage (3); and III. The combined impact of changes in sales revenue on the earnings available to equity shareholders is measured by Super-leverage or Combined leverage (1), giving the code I-2, II-3, III-1.
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UGC NET Commerce