All CPA Business Environment and Concepts (BEC) Resources
Example Questions
Example Question #7 : Financial Risk Management
Portfolio managers develop portfolios of different investments to combine, offset, and thereby reduce overall risk. However, not all risks can be eliminated by development of a portfolio. Risks that cannot be eliminated through diversification are called:
Firm-specific risks
Non-market risks
Unsystematic risks
Systematic risks
Systematic risks
Risk that cannot be mitigated by diversification is known as systematic risk.
Example Question #1 : Financial Risk Management
A financial institution is looking to assess its investment portfolio's exposure to price changes. Which of the following techniques would most likely be employed by the institution?
Market value at risk analysis
Back testing analysis
Earnings at risk analysis
Cash flow at risk analysis
Market value at risk analysis
Price risk is the exposure that an investor has to a decline in the value of a portfolio or individual securities. Being able to understand the value at risk is an important step in managing price risk.
Example Question #9 : Financial Risk Management
Which of the following types of risk can be reduced by diversification?
Inflation
Recessions
Labor strikes
High interest rates
Labor strikes
This risk can be mitigated by diversification. This form of risk is also known as unsystematic risk.
Example Question #10 : Financial Risk Management
Managers who anticipate greater return for greater risk are referred to as having what attitude toward risk?
Risk indifferent
Risk averse
Risk seeking
Cautious
Risk averse
This behavior describes managers who demand more return on an investment as risk increases.
Example Question #1 : Financial Risk Types
If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:
Risk averse
Risk indifferent
Risk seeking
Cautious
Risk seeking
If an investor is seeking lower return for higher risk, he is risk seeking.
Example Question #2 : Financial Risk Types
The numerator for the inventory turnover formula is:
Ending inventory
None of the above
COGS
COGM
COGS
The inventory turnover ratio is used to determine how effectively an entity can manage its inventory. COGS is relevant to determine this.
All CPA Business Environment and Concepts (BEC) Resources
![Learning Tools by Varsity Tutors](https://vt-vtwa-app-assets.varsitytutors.com/assets/problems/og_image_practice_problems-9cd7cd1b01009043c4576617bc620d0d5f9d58294f59b6d6556fd8365f7440cf.jpg)