In Order to Reduce Risk in a Firm, the Firm

question 25

Multiple Choice

In order to reduce risk in a firm, the firm would seek to enter a business that

• A) has high positive correlation with its present business.
• B) has zero correlation with its present business.
• C) has high negative correlation with its present business.
• D) has high negative variation with its present business.

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Definitions:

Pledged Receivables

Assets owed to a company that have been used as collateral for a loan or other financial agreement.

Loan Collateral

Security that a borrower offers a lender to secure a loan.

Uncollected Accounts

Accounts receivable that have not yet been paid by customers, representing outstanding debts owed to a business.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to meet short-term obligations.