A Firm in an Industry That Is Very Sensitive to the Business

question 57

Multiple Choice

A firm in an industry that is very sensitive to the business cycle will likely have a stock beta

• A) greater than 1.0.
• B) equal to 1.0.
• C) less than 1.0 but greater than 0.0.
• D) equal to or less than 0.0.
• E) There is no relationship between beta and sensitivity to the business cycle.

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Definitions:

Trial Balance

A bookkeeping report that lists the balances of all ledgers in two columns, debits and credits, ensuring that total debits equal total credits.

Debit

An accounting entry that increases asset or expense accounts, or decreases liability, equity, or revenue accounts.

Credit

An accounting entry on the right side of an account ledger, recording increases in liabilities, equity, and revenue, or decreases in assets and expenses.

Recording Process

The act of documenting financial transactions systematically in the books of accounts of a business.