If a Company's Stock Price (Po) Goes Up, and Nothing

question 93

Multiple Choice

If a company's stock price (Po) goes up, and nothing else changes, K_e (the required rate of return) should

• A) go up.
• B) go down.
• C) remain unchanged.
• D) need more information.

---

Definitions:

Cost-Volume-Profit Graph

A visual representation showing the relationship between a company's costs, sales volume, and profits at various levels of activity.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net loss or gain.

Operating Leverage

The degree to which a company uses fixed operating costs, with all else being equal, the higher the operating leverage, the more sensitive net operating income is to a given percentage change in sales.

Cost-Volume-Profit Graph

A graphical representation that shows the relationship between the total cost, total revenue, and level of output or volume, to analyze the profitability at different levels of operation.