Marcus Performs an Analysis of His New Business to Anticipate

question 3

Multiple Choice

Marcus performs an analysis of his new business to anticipate its future requirements.He makes a list of the various assets the firm must account for.He categorizes each asset in two lists: one for assets that can be easily converted into cash and the other for assets that have a physical presence.In this scenario, Marcus is analyzing his new business by

• A)creating a balance sheet.
• B)compiling an income statement.
• C)compiling a break-even analysis.
• D)creating a cash flow statement.

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Definitions:

Risk-free Rate

The return on investment of a theoretically risk-less security, often represented by the yield on government bonds.

Risk Premium

The additional return expected by an investor for taking on a higher level of risk, compared to a risk-free investment.

Risky Asset

An investment that holds a significant chance of losing all or part of its value.

Risk-free Asset

An investment option that ensures a definite return and carries no risk of losing money.