Would You Expect the Following to Be High or Low

question 33

Multiple Choice

Would you expect the following to be high or low in an automated firm: (1) safety margin, (2) operating leverage and (3) profit potential?

• A) low,high,high
• B) high,high,low
• C) low,high,low
• D) high,low,low

---

Definitions:

Roll's Critique

A criticism of the capital asset pricing model (CAPM) proposed by Richard Roll, arguing that the market portfolio is unobservable and thus the CAPM cannot be tested properly.

CAPM

The Capital Asset Pricing Model, a formula used to determine the theoretical return of an investment compared to its risk.

Expected Return/Beta Relationship

A concept in finance that describes the relationship between the expected return on an investment and its beta, indicating the investment's sensitivity to market movements.

Expected Return/Beta Relationship

The expected return/beta relationship is a core concept in finance, positing that the expected return on an investment is directly related to its beta, or sensitivity to market movements.