We Observe That Both the Price of and Quantity Sold

question 47

Multiple Choice

We observe that both the price of and quantity sold of golf balls are rising over time. This is due to:

• A) continual improvements in the technology used to produce golf balls.
• B) increases in the price of golf clubs over time.
• C) decreases in membership fees for country clubs with golf facilities.
• D) more stringent professional requirements on the quality of golf balls requiring producers to use more expensive raw materials.

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Definitions:

Equity Financing

The process of raising capital through the sale of shares in a company to investors.

Du Pont Identity

A formula that breaks down Return on Equity (ROE) into three component parts: profit margin, asset turnover, and financial leverage, to analyze a company’s financial performance.

Profit Margin

A fiscal indicator calculating the proportion of income left once total costs are subtracted from revenues.

Equity Multiplier

A financial ratio indicating the proportion of a company's assets that are financed by stockholder's equity.