If there is an insufficient contribution margin to cover fixed expenses, there will always be an occurrence of a net loss.
<h3>What is a Contribution Margin?</h3>
The contribution margin can be expressed in gross income terms. After subtracting the variable element of the firm's expenditures, it indicates the extra money gained for each product sold.
The contribution margin is calculated by subtracting the selling price/unit from the variable cost/unit.
This metric displays how much a certain product adds to the company's total earnings. It displays the share of revenue that helps to pay the firm's fixed costs and gives one approach to illustrate the profit potential of a certain product supplied by a company.
Therefore, If there is an insufficient contribution margin to cover fixed expenses, there will always be an occurrence of a net loss.
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Answer:
True
Explanation:
Coke tried to diversify into the bottling industry by acquiring their bottlers and in the process creating a vertically integrated business. However, 5 years later, they did find out how difficult it was and it led to a failed diversification effort when sold off their bottling operations. This was majorly due to the fact that the bottling business required too much capital investment and time. Capital investment and time that an already large enterprise like coca cola couldn't afford at that period. The initial aim was to have control over the whole production process, but soon after the diversification failed, they went back to producing just the concentrates.
Choosing when to start a project is related to the investment timing decision.
<h3>Is an investment's timing crucial?</h3>
The following are some advantages of market timing strategy:
- Market timing is utilized to increase earnings and counteract the dangers involved with small gains.
- When it comes to investments, the basic risk-return trade off holds true: the greater the risk, the greater the gain.
<h3>What does the term "investment decision" mean?</h3>
The choice and acquisition of the long-term and short-term assets in which funds will be invested by the organization are referred to as investment decisions.
<h3>What is a timing option for investments?</h3>
The investment-timing option, which is the choice to delay rather than immediately adopt or reject a capital budgeting project, can dramatically boost a project's value when interest rates are unpredictable.
<h3>What is an example of an investment decision?</h3>
- Decisions on investments can be made for the long- or short-term.
- A capital budgeting decision is another name for a long-term investment choice. Long-term financial commitments are necessary.
- A new machine purchase to replace an older one, the purchase of a new fixed asset, the establishment of a new branch, etc. are a few examples.
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