CH7: Risk and Return Quiz
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Questions and Answers

Which type of investment would Apple computers be considered today?

  • low risk investment with high annual expected returns (correct)
  • low risk investment with low annual expected returns
  • high risk investment with low annual expected returns
  • high risk investment with high annual expected returns

What are the two axes of a risk matrix?

  • Whether the customer demand and market around a proposed idea are real; whether the product can actually be built as expected (correct)
  • The profitability of the idea and the timeliness of the new technology innovation
  • Management quality and customer demand
  • The degree of familiarity with the new market and degree of familiarity with the new product or technology

What type of economy does Dropbox exhibit?

  • Economies of scope with increasing risk
  • Economies of scope with opportunity cost
  • Economies of scale with static infrastructure
  • Economies of scale with increasing returns (correct)

What is a characteristic of a flow-through entity?

<p>Taxation of corporate profits (A)</p> Signup and view all the answers

What type of business structure is characterized by perpetual continuity?

<p>Regular C-Corporation (A)</p> Signup and view all the answers

What happens to creditors if a corporation fails and proper formalities have been followed?

<p>They have a limited claim on the company's assets (C)</p> Signup and view all the answers

What is the definition of an outcome resulting from an action being certain?

<p>When it will definitely happen (A)</p> Signup and view all the answers

Which type of uncertainty is not listed in the text?

<p>Market (C)</p> Signup and view all the answers

What is a characteristic of a good entrepreneur in terms of risk-taking?

<p>They take calculated risks (D)</p> Signup and view all the answers

Which of the following tasks is the most uncertain?

<p>Begin independent research on self-driving cars (B)</p> Signup and view all the answers

What is a potential reason why a VR company struggled to stay afloat?

<p>The hype around VR died and investors no longer saw the vertical as promising (D)</p> Signup and view all the answers

What is the definition of regret in the context of entrepreneurship?

<p>The amount of gain that a person expects (C)</p> Signup and view all the answers

What is a unique strategy employed by Tencent that is not commonly seen among major Western tech companies?

<p>Refusal to cooperate with the Chinese government (C)</p> Signup and view all the answers

What leads to an increased downside in a venture?

<p>Increased hazard (A)</p> Signup and view all the answers

What type of case is an entrepreneur's assumption that their revenue growth will continue at the same rate?

<p>Optimistic case (C)</p> Signup and view all the answers

What does 'pro forma' mean in the context of financial planning?

<p>In advance of actual data (B)</p> Signup and view all the answers

What is true about the relationship between book value and market value?

<p>Market value factors in the company's growth prospects (A)</p> Signup and view all the answers

What is typically not a category of an operating expense?

<p>Investment returns (B)</p> Signup and view all the answers

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