1) Eliminating all possible risk will ultimately ...

A) result in lower expected cash flow but the highest cash flow for the worst case scenario.

B) cancel out all profits with cost of hedging.

C) guarantee the highest possible cash flow over the long run.

D) guarantee that the firm will not experience losses.

E) lead to bankruptcy.

2) Which of the following is a reason why equity capital is considered riskier than debt capital?

A) Equity capital remains invested in a short-period of time.

B) Equity capital has a fixed return.

C) Equity capital expects dividend payments which are not tax-deductible.

D) Equity capital requires regular periodic payments in the form of dividends.

E) Equity capital has a lower priority claim against assets and earnings.

3) Which of the following is a source of external capital?

A) Retained earnings

B) Operating income (earnings before interest and taxes)

C) Accounts payable

D) Issuing common stocks

E) Inventory