Which of the Following Statements Is CORRECT

question 21

Multiple Choice

Which of the following statements is CORRECT?

• A) Typically,a firm's DPS should exceed its EPS.
• B) Typically,a firm's net income should exceed its EBIT.
• C) If a firm is more profitable than average,we would normally expect to see its stock price exceed its book value per share.
• D) If a firm is more profitable than most other firms,we would normally expect to see its book value per share exceed its stock price,especially after several years of high inflation.
• E) The more depreciation a firm has in a given year,the higher its EPS,other things held constant.

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Definitions:

Collude

To cooperate secretly or illegally with others, typically to deceive or gain an unfair advantage.

Zero Profits

a situation where a firm's total revenues are exactly equal to its total costs, typically occurring in perfectly competitive markets in the long run.

Noncooperative Equilibrium

A situation in which individuals or firms choose their strategy based on the anticipation that others will act in their own self-interest, leading to an outcome where no participant can benefit by changing their strategy unilaterally.

Prisoners' Dilemma

A concept in game theory where two individuals acting in their own self-interest do not produce the optimal outcome, demonstrating the conflict between individual and collective rationality.