Which of the Following Is a "Red Flag" Suggesting That

question 21

Multiple Choice

Which of the following is a "red flag" suggesting that a company may be in trouble?

• A) A decline in days in inventory
• B) An increase in dividend payout
• C) A buildup of inventories
• D) Cash flow from operations is higher than net income

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Definitions:

Capital Allocation Line

A graph line that shows the risk-return trade-off for efficient portfolios, indicating the rate of return for each unit of risk.

Risk-free Security

A financial instrument considered to have minimal risk of default, often equated with the debt of a solvent government or government-backed entity.

Global Minimum-variance Portfolio

A portfolio constructed to achieve the lowest possible risk (variance), holding investments worldwide to diversify exposure.

Efficient Frontier

A graphical representation in modern portfolio theory showing the set of optimal portfolios that offer the highest expected return for a defined level of risk or vice versa.