Suppose That Google Announces That Its Profits for the Third

question 36

Multiple Choice

Suppose that Google announces that its profits for the third quarter of 2006 were $1.6 billion. As a result of this announcement the price of Google's stock declines. The best explanation of this is

• A)market participants were expecting Google's profits to be greater than $1.6 billion for the third quarter.
• B)market participants were expected Google's profits to be less than $1.6 billion for the third quarter.
• C)the stock market is not an efficient market.
• D)market participants have adaptive expectations.

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Definitions:

Cost Of Goods Sold

The expenses directly related to the manufacture of the products a company sells.

Product Costs

The total costs incurred to manufacture a product or provide a service, including direct materials, labor, and overhead expenses.

Inventories

Items of merchandise, raw materials, work-in-progress, and finished goods that a company holds for the purpose of sale in the ordinary course of business.

Raw Materials

The basic materials from which products are manufactured or made, typically unprocessed or minimally processed states.