High Tech Corp

question 13

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.

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Definitions:

Operating Structure

The functional and organizational setup of a company, encompassing its business operations, divisions, and the relationships between various departments.

Chief Management Accountant

A senior financial executive responsible for managing the accounting activities within an organization to support strategic decision-making.

Controller

The chief management accountant of a division or other segment of a business.

Conversion Cost

The total expense incurred to convert raw materials into finished goods, including labor and overhead costs.