What Does a General, Persistent Decline in Stock Prices Signal

question 149

Multiple Choice

What does a general, persistent decline in stock prices signal about an economy?

• A) that the economy is about to enter a boom period because people will be able to buy stock for less money
• B) that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits
• C) that the economy is about to enter a boom because people expect prices of stock to rise
• D) that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement, facilitating comparison across periods and entities.

Base Amount

A reference value or starting point against which changes or adjustments are measured.

Vertical Analysis

A method of financial statement analysis in which each entry is listed as a percentage of a base figure within the same period, facilitating comparison and trend identification.

Intercompany Comparisons

The analysis or comparison of financial and operational data between different companies within the same industry or sector to evaluate relative performance.