High Tech Corp

question 22

Multiple Choice

High Tech Corp.cut its research and development budget in 2010 by $4,000,000 in order to improve its cash flow for the year.Which of the following statements is MOST correct?

• A)The stock price will likely increase because the value of stock is based on reported cash flow.
• B)The stock price may decrease because investors may predict that future cash flows will decrease due to the lack of innovation and new products.
• C)The change will have no impact on stock price because the company's profits will not change in 2010.
• D)The stock price will increase only if reported profits in 2010 are also higher than profits reported in 2009.

---

Definitions:

Trading Debt Securities

The buying and selling of debt investments like bonds, often for speculation or income generation.

Stock Investments

Financial assets representing shares of ownership in a company, acquired for income or capital appreciation.

Profit Margin

A financial metric used to evaluate a company's profitability by comparing net income to revenue, often expressed as a percentage.

Total Asset Turnover

Total Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue.