When Evaluating a Business Decision, an Economist Will Often Resort

question 59

Multiple Choice

When evaluating a business decision, an economist will often resort to the use of present value because

• A)the profits may not be large enough to warrant the time and attention of the investor.
• B)the investment occurs in one time period and the profits in another.
• C)the investment is often in one currency and the profits in another.
• D)the investment is often under one set of managers and the profits under another.

Understand the relationship between profitability ratios and company financial decisions.

Understand the computation and interpretation of basic financial ratios, including net profit margin percentage, debt-to-equity ratio, and price-earnings ratio.

Comprehend how financial leverage impacts company's financial sustainability and shareholder's equity.

Determine the effects of transactions on liquidity ratios such as the current ratio and the acid-test (quick) ratio.

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Definitions:

Honesty

A moral quality of being truthful, sincere, and free from deceit or fraud.

Trustworthiness

The quality of being reliable, honest, and dependable in character, which is crucial for building trust in relationships.

Trait Approach

A leadership theory focused on identifying specific qualities that distinguish leaders from non-leaders.

Research

The systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions.