Marshall McBride Inherited $10,000 from His Great Aunt Martha

question 329

Multiple Choice

Marshall McBride inherited $10,000 from his Great Aunt Martha.He invested $5,000 in a new,risky start-up venture,10^th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Today,his financial planner called to inform him that the Return on Equity on 10^th Generation = 6.28%;and,Return on Equity on Major Chemicals = 10.50%.Which of the following facts is important information for Marshall McBride?

• A) The return on equity on new companies is always lower than the return on equity of well established firms.
• B) Investors willing to take added risk,expect higher returns.
• C) Return on equity is a liquidity ratio that has very little bearing on profitability.
• D) If Marshall wants to know how well his investments are performing,he should employ leverage ratios such as the debt to equity ratio.

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Definitions:

Personality

The combination of characteristics or qualities that form an individual's distinctive character and behavioral patterns.

Id

In psychoanalytic theory, the part of the mind that is the source of instinctual impulses and demands for immediate satisfaction of primitive needs.

Freud

Sigmund Freud, an Austrian neurologist and the founding father of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Biological Drives

Innate impulses in living organisms that lead to certain behaviors essential for survival.