Which of the Following Statements Regarding Financial Risk and Business

question 83

Multiple Choice

Which of the following statements regarding financial risk and business risk is true?

• A) The acceptable level of financial risk for a firm depends on its business risk.
• B) A firm with a greater degree of business risk has the ability to take on more debt.
• C) A firm with a greater degree of financial risk typically takes on less business risk.
• D) Financial risk and business risk are both important but they are not related in any way.
• E) Financial risk is more important for small firms and business risk is more important for large firms.

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Definitions:

Annuity

An investment option that guarantees fixed payments over time to the holder, frequently adopted as a component of retirement planning.

Purchase Funds

Money allocated or spent for acquiring goods, services, or assets.

Compounded Quarterly

Refers to the process of applying interest to an initial amount and any accumulated interest every three months.

Retirement Income

The total amount of money received from various sources during retirement, including pensions, savings, investments, and social security benefits.