Suppose the Move It! exercise chain has revenues of $45 million, accounting costs of $15 million, and currently has issued 10 million shares of stocks selling at $90 each. Compute the price-earning ratio. Show your work. Is this ratio relatively high or low? What might an increase in the price-earnings ratio indicate?
The earnings per share is ($45 million - $15 million)/10 million = $3 . So, the price-earnings ratio is $90/$3 = 30 . This is a high P/E ratio, as the historical average for the market is about 15 . The high PE ratio may indicate people expect the firm to have higher earnings in the future or that the stock has become overvalued.
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If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then
A) the marginal utility from the next hot dog Joey eats will be negative. B) Joey is maximizing the marginal utility per dollar he receives from eating hot dogs. C) the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. D) his total utility from eating hot dogs is negative.
A firm has two plants, one located in desirable Scenic Springs and the other located in the undesirable Swamp Lands. If the workers in Scenic Springs are paid $50,000 a year and the workers in Swamp Land are paid $60,000, which of the following is true?
A) The $10,000 difference in salaries is the worker equity payment. B) The $10,000 difference in salaries is the compensating wage differential. C) The $60,000 salary is a worker equity payment. D) The $60,000 salary is a compensating wage differential.
The cross elasticity of demand is
A) the percentage change in the demand of one good divided by the percentage change in price of another good. B) the change in the price of one good divided by the change of quantity demanded of another good. C) the percentage change in the quantity demanded of one good divided by the percentage change in the quantity demanded of another good. D) the percentage change in the price of one good divided by the percentage change in the price of another good.
Which of the following is an advantage that a sole proprietorship has over all other types of firms?
a. unlimited liability b. easy access to capital markets c. all decision making belongs to the owner d. shared liabilities e. small scale of operation