A Liability Arises When a Firm

question 100

Multiple Choice

A liability arises when a firm

• A)signs a new labor union contract which includes a 6% pay raise for its union employees.
• B)issues a purchase order for 100,000 units of inventory from a supplier over the next two years.
• C)receives inventory previously ordered.
• D)Both answers b and c are correct.
• E)None of these answer choices is correct.

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Definitions:

Global-minimum Variance Portfolio

An investment portfolio that is constructed to have the lowest possible risk (variance) for a given rate of return.

Investment Opportunity Set

The set of available investment choices available to an investor, considering their risk tolerance and time horizon for investing.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation, a creditor relationship with a governmental body or a corporation, or rights to ownership as represented by an option.

Nonsystematic Risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also called unique risk, firm-specific risk, or diversifiable risk. Systematic risk refers to risk factors common to the entire economy.