Above-average returns are
A) higher profits than the firm earned last year.
B) higher profits than the industry averaged over the last 10 years.
C) profits in excess of what an investor expects to earn from a historical pattern of performance of the firm.
D) returns in excess of what an investor expects to earn from other investments with a similar level of risk.

Question

Quizplus · Accepted Answer

Above-average returns refer to returns that exceed what an investor expects to earn from other investments with a similar level of risk. It is typically measured against a benchmark, such as the S&P 500 index, and is a key indicator of a company's profitability and investor value. Option A is incorrect because above-average returns may still be lower than the profits earned by the firm in the previous year. Option B is incorrect because it compares the company's profits to industry averages rather than its own historical performance. Option C is incorrect because it refers to historical patterns of performance rather than benchmark comparisons.

Above-Average Returns Are