According to the Efficient Market Theory

question 10

Multiple Choice

According to the efficient market theory,

• A) prices of actively traded stocks can only be under- valued in an efficient market.
• B) prices of actively traded stocks can be under- or over- valued in an efficient market, and bear searching out.
• C) prices of actively traded stocks do not differ from their true values in an efficient market.
• D) prices of actively traded stocks can only be over- valued in an efficient market.

---

Definitions:

Common-Size Financial Statement

A financial analysis tool that expresses each line item as a percentage of a common base figure.

Vertical Analysis

A financial analysis method that compares different items on a financial statement to a single base figure, providing insights into the composition of those figures.

Horizontal Analysis

A financial analysis technique that compares historical financial data across several periods to identify trends and growth patterns.

Days' Sales in Inventory

A financial metric calculating the average number of days a company holds inventory before selling it, reflecting inventory management efficiency.