A Portfolio Approach to Managing a Company's Financial Resource Fit

question 34

Multiple Choice

A portfolio approach to managing a company's financial resource fit is based on:

• A) diversifying risk across a broad spectrum of businesses.
• B) the risk/reward concept of financial analysis.
• C) the fact that different businesses have different cash flow and investment characteristics.
• D) acknowledging that each business unit has varying degrees of opportunity.
• E) All of these.

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Definitions:

Producer Surplus

The gap between the price sellers are willing to accept for their goods or services and what they end up receiving.

Consumer Surplus

The discrepancy between the amount consumers are prepared to pay for a product or service and the amount they end up paying.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded, typically downward sloping, indicating an inverse relationship.

Marginal Cost

The cost of producing one more unit of a good or service, considering variable costs but not fixed costs.