The _________________________ Holds That the Prices of All Financial Instruments

question 35

Multiple Choice

The _________________________ holds that the prices of all financial instruments are based on the optimal forecast arrived at by using all available information.

• A)efficient markets hypothesis
• B)stronger version of the efficient markets hypothesis
• C)weak version of the efficient markets hypothesis
• D)rational expectations theory

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Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing towards covering fixed costs and generating profit.

Variable Factory Overhead

Costs that vary with the volume of production and include expenses such as indirect materials and utilities.

Absorption Costing

An accounting method that includes all direct costs and overhead expenses related to the production of a product in its cost base.

Variable Costing Income Statement

A financial statement format that only includes variable costs as product costs, with fixed manufacturing overhead treated as a period expense.