Which one of the following is the best example of a risk associated with stock ownership?
A) The stock paid a regular quarterly dividend.
B) The firm's net income decreased by 4 percent for the quarter, as had been expected.
C) One of the firm's patent applications was unexpectedly rejected.
D) The firm's cost of debt increased as the result of an expected tax cut.
E) The firm's production costs increased in line with previous years.

Question

Quizplus · Accepted Answer

The rejection of a patent application could negatively impact the firm's future profits and competitiveness, which would result in a decrease in the value of the stock. The other options do not represent significant risks that would materially affect the stock's value.

Which One of the Following Is the Best Example of a Risk