Market Timing Means That Managers May Sell ________ When They

question 92

Multiple Choice

Market timing means that managers may sell ________ when they believe the stock is over-valued and rely on ________ when the stock is undervalued.

• A) debt, shares
• B) debt, preferred stock
• C) new shares, debt
• D) debt, debt

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Definitions:

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production expenses by the quantity of units manufactured.

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, factoring in the cost of opportunity.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in a competitive market make just enough profit to cover their costs.

Marginal Cost

The increase or decrease in the total cost incurred from producing one additional unit of a good or service.