One of the Theories on the Determination Of,and Change in the Value

question 65

Multiple Choice

One of the theories on the determination of,and change in the value of,shares and other securities is the random walk hypothesis.Which of the following statements in relation to the random walk hypothesis is correct?

• A) The trend of new information into the market may be consistently good or consistently bad over time.
• B) If the price of a share rose in one period, there is a higher probability that it will rise again in the next period.
• C) Share price reflects the share's intrinsic value, based on the latest information set relevant to current and future prospects.
• D) The history of previous price movements contains valuable information on likely future price movements.

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Definitions:

Lower of Cost or Market

An accounting principle requiring inventory to be recorded at either its historical cost or its current market value, whichever is lower.

Inventory Valuation

The method used by businesses to assess their inventory's worth at the end of an accounting period, affecting financial statements and tax obligations.

Conservatism

An accounting principle that guides accountants to choose methods and assumptions that are least likely to overstate assets and income.

Distribution Costs

Expenses related to delivering goods from the manufacturer to the end consumer, including transportation and warehousing.