Answer:
False
Explanation:
- cash flow is what matters: incremental cash flows matter, not accounting profits.*
- money has a time value: one dollar today is worth more than one dollar tomorrow.
- risk requires a reward: investors are risk adverse, so a risky investment requires a reward or a higher rate of return.
- market prices are generally right: financial markets are extremely efficient in determining the price of securities and other assets.
- conflicts or interest cause agency problems: managers (agents) may sometimes act based on self interest and not in the best interest of their clients, resulting in a loss of value for them.
*Many people confuse finance with accounting and they are very different. Finance uses accounting information to make decisions, but finance is about cash flows and time, e.g. a firm may have a huge profit because it sold all its merchandise on credit, but financially it's broke because it can't even pay its utilities.
