The Beta of a Firm Is More Likely to Be

question 55

Multiple Choice

The beta of a firm is more likely to be high under what two conditions?

• A)High cyclical business activity and low operating leverage
• B)High cyclical business activity and high operating leverage
• C)Low cyclical business activity and low financial leverage
• D)Low cyclical business activity and low operating leverage
• E)None of the above.

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Definitions:

Balance

Balance refers to the amount of money in a financial account, or the equality between the sum of debits and credits in an account.

Account

A record or statement of financial expenditure and receipts relating to a particular period or purpose or the contractual arrangement under which an entity manages the funds of another.

Collection Float

The delay between when a check is deposited into a bank account and when the funds are available to the depositor, affecting cash flow.

Cheques

Cheques are financial instruments that order a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued.