Roger Determines That If Aim Corporation Has High Revenues, Then

question 88

Multiple Choice

Roger determines that if Aim Corporation has high revenues, then Zest Corporation will have low revenues, and that if Aim Corporation has low revenues, Zest Corporation will have high revenues. He buys stock in both corporations.

• A)He has reduced firm-specific risk but not market risk.
• B)He has reduced market risk, but not firm-specific risk.
• C)He had reduce both firm-specific risk and market risk.
• D)He has reduced neither firm-specific risk nor market risk.

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting operating expenses.

Sales Journal

A specialized journal used to record all credit sales transactions of a business.

Cost Center

A department or unit within a business that does not directly generate profit but incurs costs, e.g., customer service or research departments.

Profit Center

A branch or division of a company that is directly responsible for generating its portion of the company's overall profit.