When Considering the Risk of Receiving Cash Flows, Financial Managers

question 42

Multiple Choice

When considering the risk of receiving cash flows, financial managers must be aware that:

• A)investors want higher returns for perceived greater risk.
• B)investors want a lower valued firm to discourage future investors which might dilute their existing control.
• C)investors expect dividends and capital gains regardless of the risks associated with achieving them.
• D)investors always want lower returns so that the risk is minimized.

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Definitions:

Rate of GDP Growth

The annual percentage increase in a country's gross domestic product, indicating the pace at which its economy is expanding or contracting.

Unsystematic Risk

The risk associated with a specific issuer of a security, such as a company's financial condition or management decisions, distinct from market risk.

Unemployment Figures

Unemployment figures represent the statistic that measures the number of people who are actively looking for employment but unable to find work, often expressed as a percentage of the labor force.

Unsystematic Risk

The risk associated with a specific company or industry, also known as non-systematic risk or diversifiable risk.