Which of the Following Statements About Financial Risk Is Incorrect

question 25

Multiple Choice

Which of the following statements about financial risk is incorrect?

• A) A rise in interest rates will adversely affect the cost of a corporation's variable debt.
• B) If a corporation imports goods from overseas then an appreciation in the exchange rate will adversely affect the company's profits.
• C) If a company (A) has sold goods to another company (B) with payment due in 30 days but company B has gone into liquidation then company A faces credit default.
• D) If a company breaches its debt-to-equity ratio loan covenants the value of the company may be adversely affected.

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Definitions:

Wavy Lines

Lines that repeatedly curve in and out, often used to represent movement or to add a decorative element.

Medulla

The innermost part of an organ or structure, especially the medulla oblongata in the brain, which controls vital functions like breathing and heart rate.

Brain Stem

The part of the brain connecting the spinal cord with the forebrain and cerebrum, responsible for regulating basic life functions such as breathing, heart rate, and sleep cycles.

Automatic Functions

Bodily processes or actions that occur without conscious thought, such as breathing, heart rate, and digestion.