Heading: Analyzing Risky Decisions

question 64

Multiple Choice

Heading: Analyzing Risky Decisions
**Reference: Use the decision tree along with the given probabilities to answer the next six questions
Probability Event A = 30% Probability Event B = 70%
Probability Event 1 = 58% Probability Event 2 = 42%
Probability of Event A given that Event 1 occurs = 16%
Probability of Event B given that Event 1 occurs = 84%
Probability of Event A given that Event 2 occurs = 50%
Probability of Event B given that Event 2 occurs = 50%

-A decision tree is:

• A)a diagram that describes the options available to a decision marker as well as the certain events that can occur at each point in time.
• B)a diagram that helps the observer calculate the expected value, variance and standard deviation of a probability distribution.
• C)not applicable to making decisions under conditions of uncertainty.
• D)a diagram that describes the options available to a decision marker as well as the risky events that can occur at each point in time.

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Definitions:

Accounts Payable Turnover

A financial ratio that measures the rate at which a company pays off its suppliers by dividing total purchases by average accounts payable for the period.

Cash Surplus

A situation where a business or individual's income exceeds its expenditures, resulting in available cash for saving or spending.

Cash Balance

The amount of cash that a company or individual has on hand at any given time.

Minimum Cash Balance

Minimum Cash Balance is the least amount of cash a company aims to hold in its register or account to meet emergency needs or unforeseen expenses.