Which of the Following Combinations of Asset Structures and Financing

question 77

Multiple Choice

Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?

• A) Illiquid assets and heavy short-term borrowing
• B) Illiquid assets and heavy long-term borrowing
• C) Liquid assets and heavy long-term borrowing
• D) Liquid assets and heavy short-term borrowing

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Definitions:

Transaction Fee

A charge assessed for processing a financial transaction, commonly found in banking and brokerage services.

Gain Or Loss

The financial result of selling an asset or investment for more or less than its purchase price, respectively.

Rate Of Yield

From an investment in stock, the ratio of the dividend to the total cost of the stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.