In Evaluating the Margin of Safety the

question 137

Multiple Choice

In evaluating the margin of safety the

• A) break-even point is not relevant.
• B) higher the margin of safety ratio the greater the margin of safety.
• C) higher the dollar amount the lower the margin of safety.
• D) higher the margin of safety ratio the lower the fixed costs.

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Definitions:

Equity Hedge Funds

Hedge funds that primarily invest in stocks in order to gain from an expected increase in equity prices.

Systematic Risk

The inherent risk that affects the entire market or market segment, often referred to as market risk or un-diversifiable risk.

Market Risk

The risk of losses in investments due to factors that affect the overall performance of financial markets.

High Water Mark

A clause in fund management contracts that prevents fund managers from receiving large bonuses for poor performance, ensuring they only earn a performance fee when the fund's value exceeds its previous highest value.