Question

1. Sound financial policy calls for using a mix of _________________and __________ to position the firm so it can survive in any interest rate environment
   1. cashflow statement, balance sheet
   2. long-and short-term debt, equity
   3. income statement, equity
   4. equity capital, cash flow
2. Which of these represent the two components of a stock’s risk?
   1. Diversifiable risk and market risk
   2. Market risk and social risk
   3. Average risk and stock risk
   4. None of the above

Answer 1

Sound Financial policy calls for using a mix of Long and Short term Debt and Equity to position the firm so it can survive in any interest rate environment (option B is correct)

The two components of risk are

i) Diversifiable risk or unsystematic risk

ii) Market risk or systematic risk

Option A) is correct