What is the break-even probability of collection for a firm that has a 40% profit margin (ignore present value)?
A) 24%
B) 40%
C) 60%
D) 80%

Question

Quizplus · Accepted Answer

The break-even probability of collection is the probability at which a firm can cover all its costs and achieve zero profit. Since the firm has a 40% profit margin, it means that 60% of the revenue generated is required to cover all its costs. Therefore, the break-even probability of collection for this firm is 60%.

What Is the Break-Even Probability of Collection for a Firm