Describe the concept of diversification and why it is important when investing.
What will be an ideal response?
You can manage investment risk using diversification. Diversification lets you smooth out all the ups and downs of your investments, and thus lowers your risk. Diversification simply means you do not put all your money into one single investment. You spread your money around over dozens, or even hundreds, of different investments. Imagine investing your money evenly among ten different companies. If one goes bankrupt, you only lose 10% of your money. But if the other nine companies increase in value by just over 11%, you do not lose any money at all. Better yet, if they increase by 12%, you still make money, despite the total loss of one of your investments. Properly diversifying across companies, industries, and markets protects you from any single investment's bringing down the total of all your investments. This collection of diversified investments is called a portfolio.
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Indicate whether the statement is true or false
The accountant failed to make the adjusting entry to record the unpaid wages of its employees as of December 31. This error will cause
A) an overstatement of assets, liabilities, and shareholders' equity. B) an understatement of expenses, liabilities, and shareholders' equity. C) an understatement of liabilities and an overstatement of shareholders' equity. D) an understatement of assets and liabilities.
Which customer service strategy element is achieved when customer service meets or exceeds customer expectations?
a. High quality customer service b. Creating value with customer service c. Customer contact centers d. Outsourcing customer service
According to Michael Porter, firm profitability is dependent on ________.
a. Industry structure b. People c. The initial capital employed d. The economy