Discussion II

Part 1 – List a company that you either admire, you’re interested in studying, or you’d like to own one day.  Would you rather that company operate as a highly leveraged company, or a company with a smaller leverage ratio?  This is another way of asking the question we presented in class last week.  If a company had $100,000 in expenses, would you rather be the company with a lot of fixed costs (say $90,000 in fixed costs and $10,000 in variable costs) or the other way, with a lot of variable costs and a small amount of fixed costs (say $10,000 in fixed costs and $90,000 in variable costs)?  Remember that’s no “right” answer, so explain your choice and most importantly, why.  It could depend on the type of business you’ve chosen.
Part 2 – If a tree falls in the woods and no one is around to hear it, does it make a sound?