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QUESTION: 156

The purpose of risk analysis is to ascertain the uncertainty of the income flows to the company’s various suppliers. Generally, there are two classes of the capital suppliers??those that provide equity capital and receive a fixed return and those:

That provides equity capital and receive a variable return but can participate in the company’s growth through increased future returns
That used to examine the uncertainty of income to the various suppliers
That provides equity capital and receive a variable return but can participate in the preparation of financial statements
That provides long-tem debt and receive a variable return but can participate in the preparation of financial statements

Answer(s): B

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QUESTION: 157

It is possible to examine the uncertainty of income to the various suppliers of capital by investigating the uncertainty of income to the company. The greater the uncertainty of income to the company:

The greater the uncertainty of the income to the investor in the company
The lesser the uncertainty of the equity to the investor in the company
The greater the uncertainty of the equity to the investor in the company
The lesser the uncertainty of the income to the investor in the company

Answer(s): A

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QUESTION: 158

In measuring the business risk, for many companies, sales volatility is the most important determinant of the fluctuation of net income measured by the standard deviation. Although companies may have some control over annual sales volume, sales volatility is, to a considerable extent, a function of the:

Economy’s overall health
Operating leverage
Consumers’ willingness to spend their disposable income
GDP

Answer(s): A,C

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QUESTION: 159

Some judicial circuits use a multifactor test to determine whether compensation is reasonable or excessive. For example, the Ninth Circuit has used a five-factor test. Which of the following is out of those factors?