When the Economy Is Poor, a Fall in Profits Can

question 23

Multiple Choice

When the economy is poor, a fall in profits can easily be explained to shareholders when most companies in the industry are also experiencing a decline in earnings; therefore, therefore when the economy is poor there is a tendency within an entity to _______.

• A)maximize write-offs
• B)maximize profits
• C)minimize revenues
• D)minimize profits

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Definitions:

Shares Outstanding

The total number of shares of a company that are currently owned by investors, including restricted shares.

Equity-Financed

A method of funding a company's operations by issuing shares to investors, rather than taking on debt.

Incremental Value

The additional value generated by undertaking a specific action or investment compared to not doing so.

Shares Outstanding

The total number of shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.