A Stock Index Tells You

question 77

Multiple Choice

A stock index tells you

• A)the average price of a collection of stocks.
• B)the expected changes in the prices of select stocks over a year.
• C)where to buy or sell stocks.
• D)what stocks to buy or sell.

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Definitions:

Accounting Profit

The financial profit of a business calculated by subtracting total expenses from total revenue, as shown in the company's income statement.

Economic Profit

A measure of profitability calculated by subtracting both explicit and implicit costs from total revenues, reflecting the true economic performance of a business.

Implicit Costs

Represent the opportunity costs of using resources that a firm already owns for production, instead of allocating them for other purposes.

Economic Profits

The margin between total earnings and all incurred costs, accounting for both obvious and concealed expenses.