Why Might It Be Argued That Corporations Do Not Have

question 27

Multiple Choice

Why might it be argued that corporations do not have a comparative advantage when investing in real estate as a means of diversification from the core business?

• A)Corporations cannot react as quickly as individual investors to changes in market conditions
• B)Corporations do not typically hold real estate in a large number of geographic areas and may not hold a variety of different types of properties
• C)Corporations often use property managers who do not understand financial markets
• D)Diversification dilutes a corporations risk-return profile and does not provide an advantage to corporations

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Definitions:

Net Working Capital

Net working capital is the difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the company.

Net Fixed Assets

The value of all fixed assets in a company, such as property, plant, and equipment, after accounting for depreciation and amortization.

Cash Flow From Assets

Is the total amount of money being transferred into and out of a business, specifically from its operational, investment, and financial activities.

Operating Cash Flow

The amount of cash generated by a company’s normal business operations.