Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:**Question: Which statement is true?**
- **A.** Financial statements reflect economic costs.
- **B.** Year-over-year decreases in liabilities are sources of cash.
- **C.** A stock with a beta of 1.00 has the total risk of the market portfolio.
- **D.** Shareholders have the prior claim to the cash flows of a corporation.
- **E.** None of the above are true.
Expert Solution
Step 1
Financial Statements:
- These are records of the finance relating activities and positions of the business or any other entity.
- These statements are based on the historical costs and the book values.
Liabilities:
- These are money or amount owed which is recorded in the balance sheet as liabilities.
- A decrease in liabilities is a representation of the usage of cash as money is paid to decrease the liabilities.
- An increase in liabilities is a representation of the source of cash as money not earned is received to increase the liabilities.
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