Question

1) Which of these statements is NOT CORRECT in terms of business risk?

Select one:

a. Business risk increases the uncertainty in future EBIT.

b. Business risk is impacted by competition in the same market.

c. Business risk depends on the amount of debt and preferred stock financing

2) ANY time you assess potential for a loss and take steps to reduce the chance of that loss occurring is considered to be:

Select one:

a. Risk Management

b. A smart decision

c. Evasive Maneuvers

3) Which of the methods below are considered to be the standard method in determining the level of risk in a stock?

Select one:

a. Standard deviation in price movement of the stock

b. Anticipated price movement of the stock

4) Business Risk is the uncertainty about Earnings Before Interest and Taxes (EBIT) in a company. (T/F) Business risk is impacted by the uncertainty of: input costs, demand in terms of unit sales, and operating leverage needed.

Select one:

True

False

5) A firm can change its beta through managerial decisions, including capital budgeting and capital structure decisions.

Select one:

True

False

Answer 1

1)

a. Business risk increases the uncertainty in future EBIT.

2) ANY time you assess potential for a loss and take steps to reduce the chance of that loss occurring is considered to be:

a. Risk Management

3) Which of the methods below are considered to be the standard method in determining the level of risk in a stock?

a. Standard deviation in price movement of the stock

4) Business Risk is the uncertainty about Earnings Before Interest and Taxes (EBIT) in a company.

True

Business risk is impacted by the uncertainty of: input costs, demand in terms of unit sales, and operating leverage needed.

True

5) A firm can change its beta through managerial decisions, including capital budgeting and capital structure decisions.

True