Which of the Following Is True of the Risk Involved

question 85

Multiple Choice

Which of the following is true of the risk involved in buying an existing business facing bankruptcy?

• A)It takes special knowledge and skills to conduct an effective turnaround.
• B)The creditors of the previous owner ask for personal guarantee from a potential buyer and place his or her personal assets at risk.
• C)Customers usually boycott the new owner due to their loyalty to the previous owner.
• D)It requires certain legal procedures and court appeals to layoff the existing pool of employees under any conditions.

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Definitions:

Annual Dividends

The total amount of dividend payments a company pays out to its shareholders in one year.

Desired Rate of Return

The minimum return an investor expects to achieve by investing in a particular asset, taking into account the asset's risk level.

Share

A unit of ownership in a company that entitles the holder to a proportion of the corporation's assets and profits.

Dividend Growth

Dividend growth is the rate at which a company's dividend payments to shareholders increase over time, indicative of the company's financial health and profit distribution policy.