Technical Analysis Is Based on All of the Following Assumptions

question 18

Multiple Choice

Technical analysis is based on all of the following assumptions except:

• A)that market value is determined by the interaction of demand and supply.
• B)that stocks with strong earnings gains will outperform the market.
• C)the assumption that, though there are minor fluctuations in the market, stock prices tend to move in trends that persist for long periods of time.
• D)that shifts in demand and supply can be detected sooner or later.
• E)that reversals of trends are caused by shifts in demand and supply.

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Definitions:

Retained Earnings

The portion of a company's profit that is held back and not distributed to shareholders as dividends, usually used for reinvestment in the business or to pay off debt.

Depreciation Expense

Spreading out the price of a tangible resource over the period it remains useful.

Common Stockholders' Equity

The portion of a company's equity that is attributable to common stock owners, reflecting their residual interest in the company's assets after liabilities are deducted.

Net Income

The amount of profit a company holds onto after all expenditures and taxes have been taken out of its revenue.