Which of the Following Statements Is Likely to Be Correct

question 55

Multiple Choice

Which of the following statements is likely to be correct for a decision tree that indicates a 30% chance of making a $250,000 profit and a 70% chance of sustaining a $140,000 loss?

• A) The decision should be yes whenever the amount of possible profit exceeds the amount of possible loss.
• B) The decision should be no whenever there is a possibility of loss.
• C) The expected value is positive before discounting.
• D) The expected value is negative before discounting.

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Definitions:

Sales

The transactions involving the exchange of goods or services for money, representing the major source of revenue for a business.

Merchandise

Goods to be bought and sold in the course of business, typically in a retail or wholesale setting.

Inventory Purchases

Transactions involving buying goods to be sold in the normal course of business, typically counted as a current asset.

Cost of Goods Sold

Cost of Goods Sold (COGS) represents the direct costs attributable to the production of the goods sold by a company, including material and labor costs.