Question

Because of portfolio effect, the most significant factor related to the risk of any investment is its _______.

Select one:

a. its standard deviation, or degree of uncertainty.

b. its effect on the risk of the portfolio.

c. systematic risk associated with the investment.

d. None of the above

A firm's statement of cash flows is useful because it tells analysts _________.

Select one:

a. what the accounting profit or loss is.

b. how cash was created.

c. the actual profit or loss.

d. the actual value of assets and liabilities.

e. the source and use of net income.

Answer 1

1. B. its effect on the risk of the portfolio.

The idea behind the portfolio effect is that risk can be reduced by combining securities, but there will be a corresponding reduction in return.

2. b. how cash was created.

Cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

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