The Standard Deviation Is Appropriate to Compare the Risk Between

question 10

Multiple Choice

The standard deviation is appropriate to compare the risk between two investments only if

• A) the expected returns from the investments are approximately equal
• B) the investments have similar life spans
• C) objective estimates of each possible outcome is available
• D) the coefficient of variation is equal to 1.0
• E) none of the above

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Definitions:

Net Operating Income

Profit or loss from a company's operations after all operating expenses are subtracted from operating revenues, but before interest and taxes are deducted.

Variable Costing

Variable costing is an accounting method that only considers variable costs in the calculation of the cost of goods sold, excluding fixed costs.

Net Operating Income

Income derived from normal business operations after subtracting all operating expenses but before interest and taxes.

Absorption Costing

An accounting procedure that integrates all production-related costs, capturing direct material expenses, direct labor costs, and all overheads, variable and fixed, within the cost framework of a product.