Which of the Following Is NOT a Potential Problem When

question 8

Multiple Choice

Which of the following is NOT a potential problem when estimating and using betas,i.e. ,which statement is FALSE?

• A) The fact that a security or project may not have a past history that can be used as the basis for calculating beta.
• B) Sometimes,during a period when the company is undergoing a change such as toward more leverage or riskier assets,the calculated beta will be drastically different from the "true" or "expected future" beta.
• C) The beta of an "average stock," or "the market," can change over time,sometimes drastically.
• D) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• E) The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns.This calculated historical beta may differ from the beta that exists in the future.

---

Definitions:

Periodic Inventory

A method of inventory valuation where updates to the inventory levels and cost of goods sold are made at the end of an accounting period.

Inventory Balance

The total value of a company's inventory at the end of an accounting period, including raw materials, work-in-progress, and finished goods.

Inventory Turnover Distortion

A situation where the calculated rate of inventory turnover does not accurately reflect a business's actual efficiency in managing inventory.

LIFO Liquidation

The process of selling older inventory that was valued under the Last-In, First-Out method, which can affect taxation and financial reporting.