Liza is evaluating two different investment opportunities. One investment appears to be speculative and uncertain, but the potential rewards are substantial. The other investment seems much more predictable, but the potential payoff is low. Which of the following do you suggest she consider in reaching her decision?
A) the risk-return ratio
B) entrepreneurial analysis
C) capital allocation
D) the acid-test ratio

Question

Quizplus · Accepted Answer

The risk-return ratio is a measure of the potential return on an investment relative to the potential risk involved. In this scenario, Liza is evaluating two investments with differing levels of uncertainty and potential reward. By considering the risk-return ratio of each investment, she can weigh the potential payoff against the potential risk and make a more informed decision. Therefore, choice A is the best option.

Liza Is Evaluating Two Different Investment Opportunities