Why do investors prefer receiving cash sooner rather than later, according to finance theory?
A) Incremental profits are greater than accounting profits.
B) Money received earlier can be reinvested and returns can be increased.
C) Tax considerations are important when investing.
D) Diversification leads to increased value.
Investors choose to invest in higher risk investments because these investments offer higher
A) expected returns.
B) inflation.
C) actual returns.
D) future consumption.
Foregoing the earning potential of a dollar today is referred to as the
A) time value of money.
B) opportunity cost concept.
C) risk/return tradeoff.
D) creation of wealth.
In measuring value, the focus should be on
A) cash flow.
B) accounting profits.
C) time value of money.
D) earnings per share.
Which of the following is a characteristic of an efficient market?
A) Small number of individuals
B) Opportunities exist for investors to profit from publicly available information.
C) Security prices reflect fair value of the firm.
D) Immediate response occurs for new public information.
Which of the following factors is most important in investment decisions?
A) The change in earnings before taxes.
B) The change in gross sales revenue.
C) The change in net income.
D) The change in after-tax cash flow.
