Which of the Following Scenarios Carries the Least Risk of NOT

question 110

Multiple Choice

Which of the following scenarios carries the least risk of NOT being able to meet required payments (capital expenditure, dividend, interest and principal requirements) totaling $96 million?

• A) Expected cash flow, $116 million, standard deviation $5 million
• B) Expected cash flow, $107 million, standard deviation $5.5 million
• C) Expected cash flow, $112 million, standard deviation $8 million
• D) Expected cash flow, $134 million, standard deviation $38 million

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Definitions:

Dividends

Funds dispensed by a business to its shareholders, allocating a fraction of the company's financial gains to them.

Operating Cash Flow

The cash generated from the normal operations of a company, reflecting the amount of cash earned from the production and selling of goods and services.

Depreciation Expense

The allocated portion of the cost of a fixed asset to expense over the asset's useful life to represent its use and wear and tear over time.

Interest Expense

The financial charge an organization incurs from taking out loans.