You Purchased Alpha Innovative Inc

question 27

Multiple Choice

You purchased Alpha Innovative Inc. stock at a price of $25 per share. Its price was $15 after six months and the company declared bankruptcy at the end of the next six months. The realized return over the last year is ________.

• A) -99%
• B) -75%
• C) -150%
• D) -100%

---

Definitions:

Break-Even Sales

The amount of revenue needed to cover total costs, at which point a business neither makes a profit nor incurs a loss.

Margin of Safety

Represents the difference between actual or planned sales and the break-even sales, indicating the amount by which sales can drop before the business incurs a loss.

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs, indicating how much revenue contributes to fixed costs and profit.

Variable Costs

Costs that vary in direct proportion to changes in levels of an activity or production volume.