Firms Prefer to Issue Stock When Earnings Expectations by the Market

question 116

True/False

Firms prefer to issue stock when earnings expectations by the market are overly optimistic.

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Definitions:

Elastic

A characteristic of a good or service that indicates a greater than proportional change in quantity demanded or supplied in response to price changes.

Inelastic

Describes demand or supply that is relatively unresponsive to price changes, meaning quantity demanded or supplied changes little when price changes.

Unitary Elasticity

A situation where a one percent change in the price of a product results in a one percent change in the quantity demanded.

Federal Excise Tax

A tax imposed by the federal government on the sale of specific goods and services, such as gasoline, cigarettes, and alcohol.