A Firm in an Industry Which Is Very Sensitive to the Business

question 16

Multiple Choice

A firm in an industry which is very sensitive to the business cycle will likely have a stock beta __________.

• A) greater than 1.0
• B) equal to 1.0
• C) less than 1.0 but greater than 0.0
• D) equal to or less than 0.0
• E) There is no relationship between beta and sensitivity to the business cycle.

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Definitions:

Statement of Financial Position

Another term for a balance sheet, which is a financial document that provides a snapshot of an entity’s assets, liabilities, and shareholders' equity at a specific point in time.

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income items.

Average Inventory

The average stock of goods held over a certain period, calculated to understand inventory levels better.

Cash Coverage Ratio

A metric that measures a company's ability to pay its interest obligations with its cash before deducting interest and taxes.