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

question 44

Multiple Choice

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

• A)Consumers demand cheaper clothes in times of recession, and that company would be expected to make lower profits.(True
• Answer )Correct
• 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.

Understand the concepts and calculations related to the cost of equity and the impact of leverage.

Calculate and interpret the debt-equity ratio and its significance for a firm's financial structure.

Understand the relationship between Earnings Before Interest and Taxes (EBIT), Earnings Per Share (EPS), and Degree of Financial Leverage (DFL).

Calculate and understand the implications of restructuring a firm's capital through debt issuance and equity repurchase.

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Definitions:

Virtual Organizations

Organizations that operate primarily through digital or electronic means, enabling remote work, digital collaboration, and operations without a fixed physical presence.

Value-Added Subcontractors

Subcontractors who not only provide services or products but also contribute additional value to the contracting company's project or process.

Telecommunications Technology

The hardware and software employed in transmitting information (voice, data, text, or images) over distances.

Organizational Culture

The shared values, beliefs, and practices that shape the behavior and attitudes of members within an organization.