Financial Management - Study Mode
[#381] Beta measures the ________.
Correct Answer
(C) Market risk
Explanation
Solution: Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return of an asset based on its beta and expected market returns.
[#382] Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.
Correct Answer
(D) Independence hypothesis
Explanation
Solution: Operating incomes and the discount rate of a particular risk class are the 2 factors determining Independence hypothesis. The Independence hypothesis is a proposed solution to the synoptic problem. It holds that Matthew, Mark, and Luke are each original compositions formed independently of each other, with no documentary relationship.
[#383] The largest single institutional owner of common stocks is________.
Correct Answer
(A) mutual funds
Explanation
Solution: The largest single institutional owner of common stocks is mutual funds. Mutual fund is an entity that pools money of large number of investors to invest in different securities.
[#384] EBIT is usually the same thing as.
Correct Answer
(D) operating profit
Explanation
Solution: EBIT is usually the same thing as operating profit. Earnings before interest and taxes (EBIT) is a company's net income before income tax expense and interest expense have been deducted. EBIT is used to analyze the performance of a company's core operations without tax expenses and the costs of the capital structure influencing profit.
[#385] The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.
Correct Answer
(B) an investment decision
Explanation
Solution: The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called an investment decision. The Investment Decision relates to the decision made by the investors or the top level management with respect to the amount of funds to be deployed in the investment opportunities.