The Theory of Efficient Markets Assumes That

question 45

Multiple Choice

The theory of efficient markets assumes that:

• A) prices of bonds, but not stocks, reflect all available information.
• B) the prices of all financial instruments reflect all available information.
• C) stock prices are relatively rigid because it takes a while for information to efficiently move through the market.
• D) the best approach to determining stock prices is to follow the chartists.

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Definitions:

Debit Memo

A document issued to record a reduction in the balance due from a customer, often due to a return or correction.

Gross Profit

The difference between revenue and the cost of goods sold before expenses.

Single-Step Income Statement

An income statement format that calculates net income using a single subtraction of total expenses from total revenue.

Fiscal Year

A fiscal year is a one-year period that companies and governments use for financial reporting and budgeting, which does not necessarily coincide with the calendar year.