Business Failure Risk

question 64

Multiple Choice

Business failure risk

• A) Cannot be diversified.
• B) Causes the business to increase its dividends.
• C) In the worst case, leads to improved earnings.
• D) Is associated with government bonds.
• E) Causes the business to be less profitable than originally anticipated.

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Definitions:

Time Value

The idea that having money now is more valuable than having the same sum at a later date because of its ability to earn more over time.

Profitability Index

A financial tool used to determine the relationship between the costs and benefits of a proposed project, calculated by dividing the present value of future cash flows by the initial investment.

Investment Amounts

The total funds allocated by individuals or businesses towards investment vehicles like stocks, bonds, or real estate for the purpose of earning returns.

Required Rate

The minimum return or yield that investors expect to receive on an investment, taking into account the risk level and market conditions.