The Principle of Finance That "Higher Returns Are Expected for Taking

question 50

True/False

The principle of finance that "higher returns are expected for taking on less risk" implies that rational investors would choose a risky investment only if they feel the expected return is high enough to justify the greater risk.

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Definitions:

Revenue Accounts

The financial accounts that track the income generated from a company's normal business operations, such as sales or service charges.

Income Summary

The income summary is a temporary account used during the closing process that contains the sums of all revenues and expenses for the period to calculate the net income or loss.

Net Income

The final financial gain of a firm once it has subtracted expenses and taxes from its revenue.

Net Loss

The amount by which total expenses exceed total revenues, indicating that a business spent more than it earned during a given period.