Assuming a Company's Return on Equity Is Less Than the Required

question 48

Multiple Choice

Assuming a company's return on equity is less than the required return, which of the following would cause a decrease in the stock price, all else the same?

• A) The beta of the stock decreases.
• B) The payout ratio decreases.
• C) The risk-free rate decreases.
• D) The dividends increase.
• E) The required return decreases.

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Definitions:

Net Loss

The amount by which a company's expenses exceed its revenues during a specific accounting period, indicating a negative financial performance.

Investment

The process of distributing funds with the goal of earning additional income or profits.

Withdrawal

Money taken out from a business by its owner for personal use, decreasing the owner’s equity in the business.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, presented in a structured manner.