Question

Changes in the value of a firm's stocks and bonds offer important information for a firm's managers. If the price is increasing investors are _______ and are providing information that indicates the firm's managers might want to _________ the business. a) more optimistic, expand b) more optimistic, contract c) more pessimistic, contract d) more pessimistic, expand

Answer 1

Answer: Option A

Explanation: In simple words, firms stock refers to the securities that a company has issued for gaining funds for operations. Prices of such securities are highly fluctuating and changes as per the prospects and existing economical conditions.

A rise in prices of the stock indicates that the returns for the stock will be going to increase in future and thus can happen only if the investors are expecting high profits in coming period.

An expansion of business opens new opportunities for the firm in market and increasing their profits proportionately leading to increase in stock prices.

Hence the correct option is A .