A corporation that is a single product firm is predicting that a price increase next year will cause unit sales to decrease. What effect would this priceincrease have on the following items for next year?A)B)C)D)ContributionMargin RatioIncreaseDecreaseIncreaseDecreaseMultiple ChoiceBreak-evenPointDecreaseDecreaseNo effectNo effect

The company can decide to increase the sales price. The increase in sales price lower the demand for…

Answered: A corporation that is a single product…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Companies often use leverage to augment profits. Based on what you learned this week, please explain the following in detail: With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage. (HINT: The key here is the relation between fixed costs and variable costs.) What does a business's Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?
How much would be the net effect on the total segment profit if product B is dropped and discontinued? Assume that by dropping product B, product A would increase A's sales by 80%. How much would be the net effect on the total segment profit? Assume that by dropping product B, product A would decrease A's sales by 20%. Moreover, 30,000 of common costs allocated are avoidable. How much would be the net effect on the total segment profit?
A firm is considering several policy changes to increase sales. It will increase inventory by $10,000 it will offer more liberal sales terms but will result in average receivables increasing by $65,000. These actions are expected to increase sales by $800,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchase of its won production needs, average payable increases by $35,000.What factors should they consider when making these decisions? What effects would they have on the firm’s cash cycle? Please select three financial ratios they should consider and why
If a firm wants to increase its working capital efficiency, it should: Increase its days inventory and days receivable and decrease days payable Decrease days inventory and increase days receivable and days payable Decrease days inventory, days receivable and days payable Decrease days inventory and days receivable and increase days payable Decrease cost of goods sold and interest expense
If sales volume increases and all other factors remain constant, then the: O contribution margin ratio will increase. O margin of safety will increase. break-even point will decrease. O net operating income will decrease.
Digital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars): Year 1 3 6 9 Profits: Expected Value $ 97 135 243 277 Year 1 3 6 a. Compute the coefficient of variation (V) for each time period. Note: Round your answers to 3 decimal places. 9 Standard Deviation $34 55 Yes 128 176 No b. Does the risk (V) appear to be increasing over a period of time? Coefficient of Variation
Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?
Which of the following items will not cause the company's ROA to increase? Multiple Choice O O Reducing costs. Reducing company assets without impacting sales. Increasing company assets. Increasing the selling price per unit. $
A Beta 1.10 Market Capitalization = 122.548B Book Value of Debt = 93.21B Bond Price = 103.10 Interest Rate = 2.75% Maturity = 20 years Therefore - PV = -1,031.00; FV = 1,000; PMT = 27.50; N = 20; CPT I = 2.55% Tax rate 21% Current One Year Treasury Bill Rate (Risk-free Rate) = 5% Market Return: Estimated at 8% Step 1 Calculate the WACC for Deere and Company (DE) given: Step 2 Step 3 Step 4 Search What are the weightings for Equity and Debt? What is the Cost of Equity? What is the After-Tax Cost of Debt? What is the WACC?

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