Which of the Following Statements Is Least True with Regards

question 5

Multiple Choice

Which of the following statements is least true with regards to Dennis Mueller's study of profit persistence?

• A)Mueller's results suggest that firms with abnormally high levels of profitability tend, on average, to decrease in profitability over time.
• B)The profit rates of firms with abnormally high levels of profitability and firms with abnormally low levels of profitability will always converge to a common mean as the theory of perfect competition predicts
• C)Mueller's results suggest that firms with abnormally low levels of profitability tend, on average, to experiences increases in profitability over time
• D)Firms that start out with high profits converge, in the long run, to rates of profitability that are higher than the rates of profitability of firms that start out with low profits
• E)Mueller's work implies that market forces are a threat to profits, but only up to a point

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Definitions:

Derivatives

Financial instruments whose value is derived from the value of an underlying asset, index, or interest rate.

Government Organizations

Entities established and funded by the government to perform specific functions or provide services aligned with government policies.

Impairment Testing

The process of evaluating assets for indications of reduced recoverability, assessing whether their carrying value exceeds their recoverable amount.

Tangible Capital Assets

physical assets owned by a business that are used in its operations and have a useful life extending beyond a single accounting period.