1) The type of risk that can be diversified away is called ________.

A) unsystematic risk

B) systematic risk

C) nondiversifiable risk

D) system-wide risk

2) Beta is ________.

A) a measure of systematic risk

B) a measure of nondiversifiable risk

C) the appropriate measure of risk for a well-diversified portfolio

D) All of the above

3) Which of the statements below is FALSE?

A) Financial statements are a collection of historical and current activities of the company.

B) The collection of value over time found in financial statements requires us to pay attention to how we construct financial ratios so as to glean information for analysis.

C) All financial statements are constructed with the same accounting principles, so you can always compare different firms based solely on these statements.

D) We want to analyze financial statements so as to compare different companies and their performance relative to our company.

4) The revenue is $40,000, the cost of goods sold is $26,000, the selling, general and administrative expenses are $7,000, interest expense is $2,000, and depreciation is $3,000. What is the EBIT?

A) $2,000

B) $4,000

C) $7,000

D) $14,000

5) Comparing two companies using ________ may point out differences in management styles.

A) common-size financial statements

B) sales growth

C) historical share prices

D) earnings per share