Which of the Following Statements Is Correct Regarding Total Risk

question 10

Multiple Choice

Which of the following statements is correct regarding total risk?

• A) A conglomerate will have more total risk than a firm that has one line of business.
• B) All firms have about the same total risk because they are all exposed to the same market risk.
• C) Total risk can be quantified by measuring the covariance between the firm and the overall market.
• D) None of these choices are correct.

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Definitions:

Average Cost Formula

A method used in accounting to determine the cost of goods sold and ending inventory by calculating the average cost of all similar items in inventory.

Ending Inventory Valuation

The valuation of goods remaining unsold at the end of an accounting period.

Average Cost Formula

A method used for inventory valuation, determining the cost of goods sold and ending inventory by calculating the weighted average of all purchases and manufacturing costs.

Periodic Inventory System

An accounting system that updates the inventory balance once at the end of the accounting period, using physical counts and purchase records.