Which of the Following Statements Is Correct

question 102

Multiple Choice

Which of the following statements is correct?

• A) A relatively risky future cash outflow should be evaluated using a relatively low discount rate.
• B) If a firm's managers want to maximize the value of the stock,they should concentrate exclusively on projects' market,or beta,risk.
• C) If a firm evaluates all projects using the same required rate of return to determine NPVs,then the riskiness of the firm as measured by its beta will probably decline over time.
• D) If a firm has a beta which is less than 1.0,say 0.9,this would suggest that its assets' returns are negatively correlated with the returns of most other firms' assets.
• E) The above statements are all false.

---

Definitions:

Costly Trade Credit

Refers to the high cost associated with the short-term financing obtained by buyers from suppliers when they choose to delay payment.

Gross Purchases

The total amount of all purchases made by a business before deducting any discounts, returns, or allowances.

Credit Terms

Credit terms are the payments conditions set by sellers for goods and services, including the period provided to the buyer to settle the owed amount.

Cash Conversion Cycle

A metric that shows the time span between a company's outlay of cash for raw materials and receiving payment from its customers, effectively measuring the time each net input dollar is tied up in the production and sales process.