What Three Elements Make Up a Balance Sheet

question 85

Multiple Choice

What three elements make up a balance sheet?

• A) Liabilities, expenses, and owner's equity
• B) Assets, liabilities, and revenues
• C) Debts, assets, and cash
• D) Assets, liabilities, and owner's equity

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Definitions:

Expected Return

The average return an investor anticipates receiving on an investment if it is held for a specific period of time.

Risk Premium

The excess return that an investment is expected to generate above the risk-free rate, compensating investors for taking on a higher level of risk.

Arbitrage

The practice of buying an asset in one market and simultaneously selling it in another market at a higher price, thereby profiting from the temporary difference in prices.

Risk-Free Economic Profits

Refers to theoretical profits that an investor can make without taking any market risk, which in reality is very hard to achieve due to market efficiencies.