Question

Warren Buffet famously said, “You only find out who is swimming naked when the tide goes out.” The quote, in part, means that when the equity market is increasing, it hides many weaknesses of businesses. What type of risk is this quote referring to?

		a. Interest rate risk
		b. Market risk
		c. Business risk
		d. Financial risk

Waste Management increased the salvage value and extended the useful life of their garbage trucks. This action resulted in decreasing and deferring expenses. What type of risk does this describe?

		a. Interest rate risk
		b. Market risk
		c. Business risk
		d. Accounting risk

Firms are least likely to use the primary equity market to raise capital for:

		a. Global expansion
		b. Research and development investments
		c. The launch of new product lines
		d. A desire to increase its financial leverage

Answer 1

Warren Buffet famously said, “You only find out who is swimming naked when the tide goes out.” The quote, in part, means that when the equity market is increasing, it hides many weaknesses of businesses. What type of risk is this quote referring to?

The correct answer is option c. business risk.

Waste Management increased the salvage value and extended the useful life of their garbage trucks. This action resulted in decreasing and deferring expenses. What type of risk does this describe?

The correct answer is option c. business risk.

Firms are least likely to use the primary equity market to raise capital for:

The correct answer is option d. A desire to increase its financial leverage