Financial managers who have a good understanding of the riskreturn tradeoff know that sources and uses of funds that offer:
A) higher rates of return always prove to be beneficial for a company.
B) neither lower rates of return nor higher rates of return expose companies to risk.
C) lower rates of return are riskier than those that offer higher rates of return.
D) higher rates of return are riskier than those that offer lower rates of return.

Question

Financial managers who have a good understanding of the risk­return tradeoff know that sources and uses of funds that offer:
A) higher rates of return always prove to be beneficial for a company.
B) neither lower rates of return nor higher rates of return expose companies to risk.
C) lower rates of return are riskier than those that offer higher rates of return.
D) higher rates of return are riskier than those that offer lower rates of return.

Quizplus · Accepted Answer

Financial managers understand that higher rates of return often come with higher levels of risk, while lower rates of return generally involve less risk. Therefore, they must weigh the potential benefits against the associated risks before making decisions on sources and uses of funds.

Financial Managers Who Have a Good Understanding of the Risk­return

Financial Managers Who Have a Good Understanding of the Riskreturn