What Is an Indicator of the Extent of Risk in Financial

question 45

Multiple Choice

What is an indicator of the extent of risk in financial systems?

• A) the difference between the unemployment rate and the natural rate of unemployment
• B) falling commodity prices
• C) the spread between the monthly U.S. T-bill yield and LIBOR rate
• D) the spread between inflation-indexed and nonindexed U.S. bonds
• E) the number of banks applying for federal assistance

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Definitions:

Net Profit

The amount of earnings remaining after all expenses, taxes, and costs have been subtracted from total revenue; also known as net income.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor.

Direct Costing

A costing method where only variable manufacturing costs are assigned to inventory and cost of goods sold, with fixed manufacturing overhead treated as a period cost.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold, with fixed overhead costs treated as period expenses.