Which of the Following Statements Is Correct

question 32

Multiple Choice

Which of the following statements is correct?

• A)Because the process of planning involves long periods of time, only long-term considerations are involved.
• B)Financial planning is built upon the assumption of the target capital structure being made.
• C)If total assets increase by the same percentage as sales increase, then assets and sales will increase by same dollar amounts.
• D)Financial planning models always include the three basic elements of firm value: cash flow size, risk, and timing.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, also known as non-diversifiable risk, affecting all investments to some degree.

Beta Coefficient

A parameter for assessing the fickleness, or inherent market risk, of a security or a composite of investments compared to the overall market.

Risk-free Asset

An investment that is expected to return its original investment without any loss and with a certain rate of return. Typically, government bonds are considered close to risk-free.