Answer:
The answer to the above question is:
"The return patterns around earnings announcement is an example of behaviorial pattern exhibiting as more investors flock to buy the stock which has shown better earnings thus driving up the price. In an efficient market, this information would already be built into the price and thus there would not be any appreciable change in price post earning announcement".
Explanation:
Answer:
Georgeland has an absolute but not a comparative advantage in producing clothing.
Explanation:
Absolute advantage is defined as the ability of a firm to produce higher amounts of a product as a result of use of the same resources with other competitors. It is usually bad a result of more efficient production process.
Comparative advantage is the ability of a firm to produce goods at a lower opportunity cost. Therefore they are able to sell at lower price compared to competitors.
Georgeland can produce 18 units of clothe per year while Alland can produce 16 units per year, so Georgeland has absolute advantage.
In producing clothes Georgeland has opportunity cost of 36 units of food which is higher than that of Alland which is 32 units of food. So Georgeland does not have comparative advantage in producing clothes.
The statement,"A real option enables the investor to buy an option for a small initial investment, hold it until a decision point arrives, and then exercise or abandon the option." is False
.
<u>Explanation:
</u>
A real option is to give corporate investment options to a company's executives. It is called "actual" because it usually refers to projects that involve a tangible asset rather than a financial product. Physical assets such as equipment, capital assets and the products are tangible assets.
The decision to extend or delay or wait or to leave a proposal may be real options. Real options require decisions or preferences that give people discretion and possible benefits when making financial decisions.
Answer:
a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.)
b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
- financial disadvantage of discontinuing the produce is -$68,000, so the company should not discontinue the product since its losses would increase
Explanation:
total sales $670,000
- variable expenses $295,000
- fixed manufacturing expenses $246,000
- fixed selling and administrative expenses $194,000
net loss = $65,000
if product D14E is discontinued, $196,000 + $111,000 = $307,000, of fixed expenses can be avoided, but $133,000 are not avoidable. if the company discontinues the product, its losses will increase by $133,000 - $65,000 = $68,000
