You are considering a project and are concerned about the reliability of the cash flow forecasts. To reduce any potentially harmful results from accepting this project, you should consider:
A) lowering the degree of operating leverage.
B) lowering the contribution margin per unit.
C) increasing the initial cash outlay.
D) increasing the fixed costs per unit.
E) lowering the operating cash flow.

Question

Quizplus · Accepted Answer

Lowering the degree of operating leverage can help mitigate the risk associated with uncertain cash flow forecasts by reducing the company's fixed costs relative to its variable costs. This makes the company more flexible and less sensitive to changes in sales volume.

You Are Considering a Project and Are Concerned About the Reliability