Sometimes One Observes That the Price of a Company's Stock

question 23

Multiple Choice

Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings.This phenomenon is

• A) clearly inconsistent with the efficient market hypothesis.
• B) consistent with the efficient market hypothesis if the earnings were not as high as anticipated.
• C) consistent with the efficient market hypothesis if the earnings were not as low as anticipated.
• D) the result of none of the above.

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Definitions:

Adjusting Journal Entries

Entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Bank Service Charges

Fees charged by banks for handling transactions, maintaining accounts, and providing other financial services.

NSF Check

A check that cannot be processed because the account on which it is drawn lacks sufficient funds, standing for "non-sufficient funds."

Bank Reconciliation

The process of comparing and matching the balances of an entity's accounting records with corresponding bank statements to ensure accuracy.