All else the same, if a firm revises its production process to use more labour and less machinery, the firm will have smaller changes in OCF for a given change in sales quantity.

Question

Quizplus · Accepted Answer

Operating Cash Flow (OCF) is more sensitive to changes in sales when costs are predominantly variable (like labor) rather than fixed (like machinery). Using more labor makes OCF more responsive to sales changes, not less.

All Else the Same, If a Firm Revises Its Production