Multiple Choice
Which of the following is one of the advantages of bootstrap funding?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Of the options listed below, which is the best example of unsystematic risk?
A
A company losing a major lawsuit
B
Inflation rising across all industries
C
A recession affecting the entire economy
D
An increase in interest rates by the central bank
Verified step by step guidance1
Understand the concept of unsystematic risk: Unsystematic risk refers to risks that are specific to a particular company or industry and can be mitigated through diversification. It contrasts with systematic risk, which affects the entire market or economy.
Analyze the options provided: Evaluate each option to determine whether it represents a risk specific to a company or industry (unsystematic risk) or a broader economic factor (systematic risk).
Option 1: 'A company losing a major lawsuit' - This is an example of unsystematic risk because it is specific to the company involved and does not affect the broader market or economy.
Option 2: 'Inflation rising across all industries' - This is an example of systematic risk because inflation impacts the entire economy and cannot be mitigated through diversification.
Option 3: 'A recession affecting the entire economy' and Option 4: 'An increase in interest rates by the central bank' - Both are examples of systematic risk as they affect the entire market or economy rather than a specific company or industry.
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