How Do Stock Prices Act as a Signal for the Future

question 213

Multiple Choice

How do stock prices act as a signal for the future value of the firm?

• A) If firms merge, stock prices could rise indicating that the merger can result in greater profitability.
• B) If stock prices rise, they could be indicating future profitability for the firm.
• C) If stock prices fall, they could be indicating declining economic conditions.
• D) All of these possibilities are correct.

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Definitions:

Hygiene Factors

Elements of the work environment that can lead to job dissatisfaction if absent or inadequate, such as salary, company policies, and working conditions, but do not necessarily motivate if increased.

Motivational Aspects

Components or factors that stimulate desire and energy in people to be continually interested and committed to a job, role, or subject.

Goal Setting

The process of identifying specific, measurable, achievable, relevant, and time-bound objectives to focus efforts and resources.

Performance Expected

The level of results anticipated from an individual or group within a specific time frame, often setting the standard for evaluations.