In Terms of the Decision of What to Do with Extra

question 56

Multiple Choice

In terms of the decision of what to do with extra cash, the firm's managers should undertake projects only if:

• A) the firm never pays a dividend.
• B) the expected return on the project is greater than that of an asset of similar risk.
• C) the expected return on the project is less than that of an asset of similar risk.
• D) the expected return on the project is equal to that of an asset of similar risk.

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Definitions:

Income Statement

A financial report showing the company’s revenues, expenses, and profits over a specific period of time.

Administrative Expense

Costs related to the general operation of a business that are not directly tied to producing goods or services, such as salaries of office staff and utilities.

Other Expense

Expenses that cannot be traced directly to operations.

Unusual Item

An uncommon or rare event that affects a company's financial statements, not expected to recur frequently.