Financial Management - Study Mode
[#511] According to the _______ model, the dividend decision is irrelevant.
Correct Answer
(A) MM
Explanation
Solution: According to the MM model, the dividend decision is irrelevant. Modigliani and Miller suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company has no effect on the stock price of a company or the company's capital structure.
[#512] According to Markowitz, an efficient portfolio is one that has the_________________.
Correct Answer
(C) largest expected return for a given level of risk
Explanation
Solution: According to Markowitz, an efficient portfolio is one that has the largest expected return for a given level of risk. This theory was pioneered by Harry Markowitz in his paper "Portfolio Selection," published in 1952 by the Journal of Finance.
[#513] The cash management refers to management of ___________.
Correct Answer
(C) cash and near cash assets
Explanation
Solution: The cash management refers to management of cash and near cash assets. Cash management is the process of collecting and managing cash flows. Cash management can be important for both individuals and companies. In business, it is a key component of a company's financial stability.
[#514] Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by_______________.
Correct Answer
(A) aggressive investors
Explanation
Solution: Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by aggressive investors. A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds
[#515] Miller- Orr Model is suitable in those circumstances when the ________.
Correct Answer
(D) Demand for cash is variable
Explanation
Solution: The Miller-Orr model of cash management is developed for businesses with uncertain cash inflows and outflows. This approach allows lower and upper limits of cash balance to be set and determine the return point (target cash balance).