Which One of the Following Statements Is False

question 41

Multiple Choice

Which one of the following statements is false?

• A) When we compute the return of a security based on the average payoff we expect to receive, we call it the expected return.
• B) The notion that investors prefer to have a safe income rather than a risky one of the same average amount is call risk aversion.
• C) Because investors are risk averse, the risk-free interest rate is not the right rate to use when converting risky cash flows across time.
• D) The more risk averse investors are, the higher the current price of a risky asset will be compared to a risk-free bond.

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Definitions:

Receivables Turnover

A financial metric indicating how often a company collects its average accounts receivable within a certain period, measuring the efficiency of credit sales collection.

Profit Margins

A financial metric used to evaluate a company's financial health by revealing the percentage of revenue that exceeds the costs of goods sold.

Days' Sales

A financial metric that measures the average number of days it takes a company to convert its inventory into sales.

Long-Term Solvency Ratios

Financial metrics used to assess a company's ability to meet its long-term financial obligations.