Deena Operates a Coffee Shop Located near the University Campus

question 70

Multiple Choice

Deena operates a coffee shop located near the university campus. Her major competitor is Kaprice's Coffee on the corner across the street from Deena's Café. Recently, Deena decided to raise the price of all the products she sells. Since they are close competitors with Deena's Café, Kaprice's can most likely experience:

• A) an increase in sales.
• B) a decrease in sales.
• C) an operating loss.
• D) an operating profit.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing shareholders' ownership interest.

Residual Income

The net income that an investment or business generates above the minimum required return, often used in performance evaluation.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross income, but before taxes and interest are deducted.

Average Operating Assets

The average value of the resources used in the operations of a business, calculated over a certain period.