A Financial Model Is Only as Good as

question 71

Multiple Choice

A financial model is only as good as

• A)the rate of growth in the economy.
• B)the company's operating leverage.
• C)the assumptions it uses and the data it uses.
• D)None of the answers are correct.

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Definitions:

Derivative Financial Instrument

is a financial contract whose value is based on the performance of underlying assets, indices, or interest rates, used for speculation, hedging, or risk management.

Option

A financial instrument that gives the holder the right to buy or sell a certain number of shares or debentures in a company by a specified date at a stipulated price.

Shares

Shares represent portions of equity in a company or financial asset, entitling holders to a proportional share of profits through dividends, when declared.

Equity Transaction

Transactions that affect the ownership interest of shareholders in a company, including issues, buybacks, and sale of shares.