A Firm Should Always Shut Down If It Is Earning

question 94

True/False

A firm should always shut down if it is earning negative profits.

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Definitions:

Expected and Required Returns

The returns that investors anticipate or demand from an investment considering its risk, often guiding investment decisions.

SML

Stands for Security Market Line; it represents the relationship between the expected return of an investment and its risk in the capital asset pricing model (CAPM).

Beta of the Portfolio

An assessment of a portfolio's volatility or inherent risk, relative to the overall market.

Required Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put their money into it.