Firms Usually Face Asymmetric Variable Adjustment Costs Because

question 25

Multiple Choice

Firms usually face asymmetric variable adjustment costs because

• A)hiring costs are typically higher than firing costs.
• B)firing workers is relatively easy compared to hiring workers.
• C)firing workers can be difficult and costly for legal reasons compared to hiring workers.
• D)workers are reluctant to change jobs during a recession but not during an expansion.
• E)firms vary in size.

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Definitions:

Times Interest Earned

A ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its total interest expenses.

Debt to Equity

A financial metric showing the comparative amount of debt and shareholders' equity utilized to fund a company's assets.

Price/Earnings

A valuation ratio of a company's current share price compared to its per-share earnings, used to assess if a stock is over or undervalued.

Ratio Analysis

A technique of analyzing the strength of a company by forming (financial) ratios out of sets of numbers from the financial statements. Ratios are compared with the competition, recent history, and the firm’s plan to assess the quality of its performance.