Conservatism means: a)not underestimatingasset values, when faced with uncertainty aboutthe value of assets and liabilities. b)using themost optimistic measurement when faced withuncertainty about the value of assets andliabilities. c)not overestimating liabilities, whenfaced with the uncertainty about the value ofassets and liabilities. d)using the least optimisticmeasurement when faced with uncertaintyabout the value of assets and liabilities.

Accounting principles means the fundamental upon which the whole accounting is based. Every entity…

Answered: Conservatism means: a)not…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter10: Valuing Early-stage Ventures

Section: Chapter Questions

Problem 3DQ

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Financial analysis does not include assessing future performance and risk because financial statements are based on past performance. True or False True False
Someone who is risk neutral A. does not care about an asset's risk B. places a value on an asset equal to its expected expected value OC. is indifferent between a risk-free asset and a risky asset with the same expect value OD. all of the above OE. none of the above
Critically evaluate the pros and cons of the following statement: Financial statements are useless because they present assets at their historical costs rather than at their fair market values.
When adding a risky asset to a portfolio of may risky assets, which property of the asset has a greater influence on risk: its standard deviation or its covariance with other assets? Explain
any risk attached to a financial asset should not be considered when making an investment decision because all financial assets are risky. true or false?
Which of the following statements describing the elements of intrinsic valuation is most accurate? a. A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best. b. The risk-free rate is the lowest rate that an investor can earn from short-term investments.c. When the present value of the cashflows is discounted with the appropriate rate end this present value is positive, then the asset providing these cashflows have a value to the investor. d.Cashflows may include depreciatipon expenses and amortization costs.
Regarding risk levels, financial managers should: A. evaluate investor's desire for risk. B. avoid higher risk projects because they destroy value. C. pursue higher risk projects because they increase value. D. focus primarily on market fluctuations. Note: Provide short answer for this account question
Using common-size balance sheet percentages to project individual assets, liabilities, or shareholders' equity has all of the following shortcomings except: a. Individual assets, liabilities, and shareholders' equity are independent of each other. b. The common-size percentages do not permit the analyst to easily change the assumptions about the future behavior of an individual asset or liability. c. Individual assets, liabilities, and shareholders' equity are not independent of each other. d. If a company experiences changing proportions for investments in securities among its assets, other asset categories may show decreasing percentages in some years even though their dollar amounts are increasing.
A3) Finance Which one is a financial risk? Select one: a. Uncertainty about demand b. uncertainty about cost d. None of the above
What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumed
Which one of the following statements is correct concerning unsystematic risk? An investor is rewarded for assuming unsystematic risk. Beta measures the level of unsystematic risk inherent in an individual security. Eliminating unsystematic risk is the responsibility of the individual investor. Standard deviation is a measure of unsystematic risk. Unsystematic risk is rewarded when it exceeds the market level of unsystematic risk. оо O O
The desired rate of return on an investment should reflect the degree of risk involved. A. True B. False

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