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Firms with a high degree of operating leverage are?
Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease. Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease.
In a perfectly competitive market do firms exhibit productive efficiency?
in the short-run they are not able to but in the longrun it can be attainerd as businesses want to lower their average costs!
What are the implications of the baumol model of cash management?
The Baumol model of cash management provides a framework for firms to optimize their cash holdings by balancing the trade-off between transaction costs and opportunity costs of holding cash. It suggests that companies should maintain a target cash balance that minimizes these costs, leading to more efficient cash management and improved liquidity. By determining the optimal amount of cash to hold and the frequency of cash replenishment, firms can enhance their financial performance and reduce the risks associated with cash shortfalls. Overall, the model aids in strategic financial planning and resource allocation.
Why does it make sense for unprofitable firms to stay in business?
Sometimes an unprofitable firm will have a business unit that is profitable. Operating the other units will help cover the overhead costs, allowing the business to take care of their bills.
Why do firms expand into other countries?
Probably the most common reason that firms expand into other countries has to do with the costs of doing business. For example, it is well known that many firms today are operating in China. The reason for this relates to the cost and ready availability of labor in that country. A US manufacturer may experience cost savings of 20 to 30% on an after-tax basis by offshoring its manufacturing to China, though this will normalize over time. Another very important reason is to take advantage of what are referred to as transfer pricing relationships, whereby firms shift their taxes to countries with favorable rates; smart managers will accomplish both of these goals with one transaction. Other reasons relate to expanding into growing countries and increasing sales, locating closer to international customers and reducing logistics costs, locating closer to sources of materials, etc.
What nonfinancial measurements sometimes accompany the financial statements in reports to stockholders?
nonfinancial measures include information on such items as revenue percentage per employee, employees who have contact with customers, satisfied customers, research and development costs
What is the cost for a full title examination for real estate?
Costs vary in different jurisdictions. You should call some law firms in your jurisdiction to get an idea of the costs locally.Costs vary in different jurisdictions. You should call some law firms in your jurisdiction to get an idea of the costs locally.Costs vary in different jurisdictions. You should call some law firms in your jurisdiction to get an idea of the costs locally.Costs vary in different jurisdictions. You should call some law firms in your jurisdiction to get an idea of the costs locally.
When external costs are generated by firms the government should?
stop
What are examples of total costs?
In a perfectly competitive market, all n firms are equal. Thus, the market total cost is the total cost (TC) of one firm multiplied by the amount of n firms in the market Total Market Cost =Variable Costs and fixed costs ...Fixed costs plus variable costs.
Why do firms exist Adam smith?
Firms exist in order to minimize transactions costs. Tough that is only one of many reasons.
Why would a firm want to incur transaction cost?
Firms would not want to incur transactions costs. In fact, firms would much prefer to have zero transactions costs, since that would maximise their profits.
Would a decrease in input cost to firms in a market will result in a decrease in equilibrium price?
A decrease in input costs to firms in a market will result in
If a firms fixed financial costs decrease the firms operating breakeven point will do what?
decrease <--------WRONG!!!!! The operating breakeven point will remain unchanged.
What are total cost of production examples?
In a perfectly competitive market, all n firms are equal. Thus, the market total cost is the total cost (TC) of one firm multiplied by the amount of n firms in the market Total Market Cost =Variable Costs and fixed costs ...Fixed costs plus variable costs.
What is a Pure competition?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero Economics profits.
What is pure competitive?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero Economics profits.
Definition of private cost in economics?
These are costs that are incurred to an individual or firm when they are carrying out the activities of consumption or production. They are the costs that those individuals or firms have to pay themselves.
