Proper Risk-Return Management Means That

question 39

Multiple Choice

Proper risk-return management means that

• A) the firm should take as few risks as possible.
• B) the firm must determine an appropriate trade-off between risk and return.
• C) the firm should earn the highest return possible.
• D) the firm should value future profits more highly than current profits.

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Definitions:

Fixed Expenses

Costs that do not vary with the level of production or sales over a given period, such as rent or salaries.

Margin Of Safety

The difference between actual or budgeted sales and the break-even point, indicating the risk level of not covering fixed costs.

Contribution Format

A form of income statement where costs are divided into variable and fixed, and the contribution margin is calculated to determine profitability.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, displaying revenue, expenses, and profit or loss.