If a Firm Is Not Covering the Cost of All

question 540

Multiple Choice

If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm) , it will generally

• A) go out of business in the long run.
• B) remain in business as long as the current conditions are unchanged.
• C) experience an increase in its stock price because investors will be attracted to it.
• D) attempt to expand the size of its operation.

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Definitions:

Basic Earnings

An indicator of a company's profitability, calculated before any deductions are made, representative of the raw financial performance.

Weighted Average

A calculation method where each data point is multiplied by a weight that reflects its importance or frequency before summing them up to a single average value.

Common Shares Outstanding

The total number of shares of common stock that are currently owned by investors, including both public shareholders and company insiders or officers.