wer choices   When purchasing stocks, it is best to look at a variety of factors such as the overall financial condition of the business, how much debt it has, revenue inflows, projected markets, and the quality of management.   In the case of financial investments, it is wise to diversify one's portfolio.   Although the return is generally proportional to risk, in long-run investments the volatility (risk) smooths out (becomes less risky).   When purchasing stocks, all else being the same, usually, it is bette

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
ChapterST3: The Stock Market: Its Function, Performance, And Potential As As Investment Opportunity
Section: Chapter Questions
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This is not a writing assignment, this is a multiple-choice question

Which of the below statements regarding financial investments decisions is likely to be INCORRECT?

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When purchasing stocks, it is best to look at a variety of factors such as the overall financial condition of the business, how much debt it has, revenue inflows, projected markets, and the quality of management.

 

In the case of financial investments, it is wise to diversify one's portfolio.

 

Although the return is generally proportional to risk, in long-run investments the volatility (risk) smooths out (becomes less risky).

 

When purchasing stocks, all else being the same, usually, it is better to purchase a stock with a very high price/earnings (or P/E) ratio than one with a lower P/E ratio.

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