If the Expected Future Earnings of a Company Goes Down

question 7

Multiple Choice

If the expected future earnings of a company goes down, you would expect the price of its stock to

• A) rise.
• B) fall.
• C) be unaffected.
• D) fall to zero.

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Definitions:

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company's balance sheet.

Credit

An entry on the right side of a ledger account, representing an increase in liabilities or equity or a decrease in assets; in a broader sense, also refers to the provision of resources by a creditor to a borrower.

Compound Entry

A journal entry that involves three or more accounts.

Journal Entry

A journal entry is a record in the books of accounts that represents a business transaction, detailing the accounts affected and the amounts.