The Most Important Criteria When Adding New Investments to a Portfolio

question 66

Multiple Choice

The most important criteria when adding new investments to a portfolio is the

• A) Expected return of the new investment.
• B) Standard deviation of the new investment.
• C) Correlation of the new investment with the portfolio.
• D) Both a and b
• E) All of the above are equally important

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Definitions:

Cash Cycle

It describes the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Inventory Period

The amount of time it takes for a company to sell through its current stock of inventory.

Accounts Receivable Period

The average number of days that it takes a company to collect payments after a sale has been made, a critical component of managing cash flow.

Accounts Payable Period

The average number of days it takes for a business to pay its suppliers and vendors.