Firms Do Not Usually Get Rewarded by Diversifying Investments in Different

question 75

Multiple Choice

Firms do not usually get rewarded by diversifying investments in different lines of business because ________.

• A) the capital markets are efficient and they quickly respond to change in economic conditions
• B) cash flows from such projects tend to respond less to changing economic conditions
• C) investors themselves can diversify by holding securities in a variety of firms; they do not need the firm to do it for them
• D) it is not possible for a firm to diversify its risk as the inflation premium is different for different projects

Understand the factors leading to economic disparities between countries.

Analyze the role of capital goods versus consumer goods in determining a country’s economic status.

Understand the basic principles and laws governing partnerships.

Recognize the implications of partnership duties and responsibilities on personal liability and profit sharing.