Consider the market for ABC Company's stock. What shouldhappen in this market after an announcement that the companyis having financial difficulties?
A)The demand for the stock would shift to the left.(True Answer )Correct
B)The demand for the stock would shift to the right.
C)The supply of the stock would shift to the left.
D)The supply of the stock would shift to the right.

Question

Quizplus · Accepted Answer

When a company announces financial difficulties, it is likely that investors will become less optimistic about the company's future earnings and growth prospects. As a result, the demand for the company's stock will decrease, causing a leftward shift in the demand curve. This means that at any given price, fewer investors will want to buy the stock. This is because they will be less confident about the company's ability to generate profits and pay dividends in the future.

Consider the Market for ABC Company's Stock