Which of the Following Is Correct Regarding the Total Risk

question 19

Multiple Choice

Which of the following is correct regarding the total risk of a company?

• A) A company can change its risk level over time.
• B) Some firms are riskier because they offer many different products and/or services.
• C) Companies can change their risk by reducing the amount of money they have borrowed.
• D) None of these statements are correct.

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Definitions:

Residual Dividend Policy

A strategy where dividends are based on earnings remaining after all project capital needs are met.

Target Capital Structure

Target capital structure refers to the mix of debt, equity, and other financing sources a company aims to maintain to fund its operations and growth, while optimizing its cost of capital.

Net Income

The sum a company keeps as profit after deducting all operational costs and tax obligations from its gross revenue.

Total Dividend Payment

The sum of all dividends paid to shareholders over a specific period, usually expressed on a per share basis.