The six principles of finance include all of the following except:
A)Money has a time value
B)Higher returns are expected for taking on more risk
C)Diversification of investments can reduce risk
D)Financial markets are inefficient in pricing securities
E)all of the above are among the six principles

Question

Quizplus · Accepted Answer

The six principles of finance are as follows:

1. Money has a time value
2. Higher returns are expected for taking on more risk
3. Diversification of investments can reduce risk
4. Financial markets are efficient in pricing securities
5. The goal of a firm is to maximize shareholder wealth
6. Cash flows are the source of value for all investments

Option D, 'Financial markets are inefficient in pricing securities' contradicts Principle 4. Hence, it is not one of the six principles of finance.

The Six Principles of Finance Include All of the Following