Which of the following is true of cash flows and risk?
A) Low cash flow and low risk result in an increase in share price.
B) High cash flow and low risk result in an increase in share price.
C) High cash flow and high risk result in an increase in share price.
D) Lo cash flow and high risk result in an increase in share price.

Question

Quizplus · Accepted Answer

High cash flow and low risk are desirable traits, and investors are willing to pay a premium for companies that exhibit these characteristics. This results in an increase in share price. Low cash flow and high risk are typically associated with companies that are struggling, and investors are less likely to invest in these companies, resulting in a decrease in share price. Therefore, option B, which indicates that high cash flow and low risk result in an increase in share price, is the correct answer.

Which of the Following Is True of Cash Flows and Risk