Suppose That Firms with Unexpectedly High Earnings Earn Abnormally High

question 22

Multiple Choice

Suppose that firms with unexpectedly high earnings earn abnormally high returns for several months after the announcement. This would be evidence of:

• A) efficient markets in the weak form.
• B) inefficient markets in the weak form.
• C) efficient markets in the semistrong form.
• D) inefficient markets in the semistrong form.
• E) inefficient markets in the strong form.

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Definitions:

Overhead Applied

The amount of manufacturing overhead costs allocated to individual products or job orders based on the predetermined overhead rate.

Predetermined Overhead Rate

An estimated overhead rate used to allocate manufacturing overhead to products or job orders, calculated before production begins based on budgeted costs and activities.

Finishing Department

The department in a manufacturing process where products undergo final operations, such as painting, polishing, or packaging, before being sold.

Direct Labor-Hour

A unit of measure for the time spent by workers on producing a specific number of goods.