Why Would Stock for a High-End Store with Expensive Clothing

question 162

Multiple Choice

Why would stock for a high-end store with expensive clothing be considered risky in a recession?

• A) Consumers demand cheaper clothes in times of recession, and that company would be expected to make lower profits.
• B) Consumers do not buy stock when recessions occur.
• C) High-end clothing store stocks have low covariance with the market.
• D) Stocks from such companies depend heavily on oil prices.

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Definitions:

Net Loss

The amount by which a company's expenses exceed its revenues, indicating that the business has spent more than it has earned in a specific period.

Total Cost Method

An accounting method that includes all costs related to the production of goods when calculating inventory cost.

Nonproduction Costs

Expenses not directly associated with the manufacturing or production of goods, such as selling, administrative, and other overhead costs.

Production Costs

Expenses directly associated with the creation of goods or services, including raw materials, direct labor, and manufacturing overhead.