Which of the Following Statements About the Index of Leading

question 151

Multiple Choice

Which of the following statements about the index of leading economic indicators is the most accurate?

• A)It provides accurate information on the duration of downturns in the economy.
• B)It provides accurate information on the depth of downturns in the economy.
• C)It can result in a self-fulfilling prophecy if business firms respond to leading economic indicator predictions.
• D)It virtually always predicts downturns in the economy with a lead-time of six months.

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Definitions:

Depreciation

The allocation of the cost of an asset over its useful life.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses.

Degree of Financial Leverage

A measure of a company's use of borrowed funds to finance its operations, indicating the sensitivity of its earnings to fluctuations in operational income.

EPS

Earnings Per Share (EPS) is a financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.