Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A) The unlevered beta measures the market risk of the firm's business activities, ignoring any additional risk due to leverage.
• B) If a firm holds $1 in cash and has $1 of risk-free debt, then the interest earned on the cash will equal the interest paid on the debt. The cash flows from each source cancel each other, just as if the firm held no cash and no debt.
• C) The unlevered beta measures the market risk of the firm without leverage, which is equivalent to the beta of the firm's assets.
• D) When a firm changes its capital structure without changing its investments, its levered beta will remain unaltered, however, its asset beta will change to reflect the effect of the capital structure change on its risk.

Understand the concept and applications of permutations in optimization problems.

Understand how to calculate and interpret the gross margin ratio.

Identify and understand the components and significance of ending inventory.

Calculate and understand the implications of the current ratio and acid-test ratio for business liquidity.

---

Definitions:

Predisposition

A tendency, inclination, or bias that affects someone's attitude or behavior towards something.

Perceived Risk

The potential that a chosen action or activity (such as a purchase) will lead to a loss or an undesirable outcome for the consumer.

The Wall Street Journal

A leading international daily newspaper focusing on business, financial news, and analysis.

Coffeemaker

An appliance used to brew coffee by passing hot water through ground coffee beans.