Question 1

Which of the following are measures of liquidity?
I. net working capital
II. net profit margin
III. current ratio
IV. times interest earned

Accepted Answer

A)  I and III only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, III and IV only 
A)  I and III only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, III and IV only

Question 2

Which of the following industries best fits the definition of "rapid growth industry"?

Accepted Answer

A)  Alternative energy (wind & solar) as it replaces fossil fuels. 
B)  Automotive as sales of SUVs and light trucks grow at the expense of sedans. 
C)  Pharmaceuticals as an aging population uses more medicines. 
D)  Retail as online shopping becomes more popular at the expense of brick and mortar stores. 
A)  Alternative energy (wind & solar) as it replaces fossil fuels. 
B)  Automotive as sales of SUVs and light trucks grow at the expense of sedans. 
C)  Pharmaceuticals as an aging population uses more medicines. 
D)  Retail as online shopping becomes more popular at the expense of brick and mortar stores.

Question 3

Which of the following would be found on a company's balance sheet?
I. Accounts receivable
II. Interest expense
III. Property plant and equipment
IV. Total stockholders' equity

Accepted Answer

A)  I an IV only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, III and IV only 
A)  I an IV only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, III and IV only

Question 4

Briefly describe fundamental analysis and the basic assumption behind it.

Accepted Answer

1. rests on the belief that the value of

Question 5

Which of the following would be typical of a Statement of Cash Flows for a healthy firm in a sustainable business?

Accepted Answer

A)  Cash flow from operations is negative, cash flows from investment activities and financing activities are positive. 
B)  Cash flow from operations , investment activities and financing activities must all be positive. 
C)  Cash flow from operations is positive, cash flows from investment activities and financing activities are negative. 
D)  If the Statement shows a net increase in cash, the source is unimportant. 
A)  Cash flow from operations is negative, cash flows from investment activities and financing activities are positive. 
B)  Cash flow from operations , investment activities and financing activities must all be positive. 
C)  Cash flow from operations is positive, cash flows from investment activities and financing activities are negative. 
D)  If the Statement shows a net increase in cash, the source is unimportant.

Question 6

Financial ratios can reveal a lot about a company's liquidity, activity, and profitability.

Accepted Answer

A) True 
 B)False

Question 7

Most firms tend to be more profitable and have higher stock values when the economy is strong.

Accepted Answer

A) True 
 B)False

Question 8

To determine whether a pharmaceutical company's profitability ratios indicate strength or weakness, we should
I. compare them to others in the same industry.
II. compare them to companies in unrelated industries such as energy or banking.
III. compare them to previous years.
IV. compare them to absolute standards established by the CFA Institute.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  III and IV only 
D)  IV only 
A)  I and II only 
B)  I and III only 
C)  III and IV only 
D)  IV only

Question 9

A lending institution would prefer that a firm have a _____debt-equity ratio and a______ times interest earned ratio.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 10

Markets can only be efficient if many competent analysts are performing fundamental analysis.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would be found on a company's income statement?
I. cost of goods sold
II. interest expense
III. cash flow from operations
IV. earnings before taxes

Accepted Answer

A)  I an IV only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, II, III and IV 
A)  I an IV only 
B)  I, II and III only 
C)  I, II and IV only 
D)  I, II, III and IV

Question 12

The statement of cash flows is less influenced than the income statement by choices of accounting methods.

Accepted Answer

A) True 
 B)False

Question 13

Positive cash flow from investing activities is typical of firms experiencing healthy growth.

Accepted Answer

A) True 
 B)False

Question 14

Use the following information for the question(s) that follow.

Patco and Ramsco are competitors in the same industry and have the following ratios.

-Based on the information above, we can conclude that

Accepted Answer

A)  Ramsco is using leverage more aggressively than Ramsco. 
B)  Ramsco is more liquid than Ramsco. 
C)  Ramsco is using assets more efficiently than Ramsco. 
D)  Ramsco is reinvesting a higher percentage of its earnings in the business than Ramsco. 
A)  Ramsco is using leverage more aggressively than Ramsco. 
B)  Ramsco is more liquid than Ramsco. 
C)  Ramsco is using assets more efficiently than Ramsco. 
D)  Ramsco is reinvesting a higher percentage of its earnings in the business than Ramsco.

Question 15

Which of the following is most likely to increase in value as the result of a weakening dollar?

Accepted Answer

A)  an ADR for a foreign telecommunications company 
B)  stock in a firm that depends heavily on imported raw materials 
C)  stock in a firm with many accounts payable in foreign currencies 
D)  stock in a foreign company that depends heavily on exports to the U.S. 
A)  an ADR for a foreign telecommunications company 
B)  stock in a firm that depends heavily on imported raw materials 
C)  stock in a firm with many accounts payable in foreign currencies 
D)  stock in a foreign company that depends heavily on exports to the U.S.

Question 16

Economic analysis is concerned with how the general state of the economy will impact the performance of a particular company within a particular industry.

Accepted Answer

A) True 
 B)False

Question 17

The PEG ratio divides the stock's current price by the growth rate of earnings over the preceding 12 months.

Accepted Answer

A) True 
 B)False

Question 18

Nadine Enterprises has total assets of $240,000, a debt-equity ratio of 0.60, and a return on assets of 9%. What is the return on equity?

Accepted Answer

A)  5.4% 
B)  5.6% 
C)  14.4% 
D)  15.0% 
A)  5.4% 
B)  5.6% 
C)  14.4% 
D)  15.0%

Question 19

Worcester Corporation has a P/E ratio of 15. Natick Corporation is in the same industry as Worcester, but has a P/E ratio of 20. Possible interpretations of this discrepancy include

Accepted Answer

A)  Worcester Corporation is overpriced. 
B)  Natick Corporation has higher earnings per share. 
C)  Investors expect Natick to grow faster than Worcester. 
D)  Natick's stock price is higher than Worcester's. 
A)  Worcester Corporation is overpriced. 
B)  Natick Corporation has higher earnings per share. 
C)  Investors expect Natick to grow faster than Worcester. 
D)  Natick's stock price is higher than Worcester's.

Question 20

Briefly describe and discuss industry analysis and the motivation behind it.

Accepted Answer

Industry analysis
1. focuses on the acti

Which of the following are measures of liquidity? I. net working capital II. net profit margin III. current ratio IV. times interest earned

Which of the following industries best fits the definition of "rapid growth industry"?

Which of the following would be found on a company's balance sheet? I. Accounts receivable II. Interest expense III. Property plant and equipment IV. Total stockholders' equity

Briefly describe fundamental analysis and the basic assumption behind it.

Which of the following would be typical of a Statement of Cash Flows for a healthy firm in a sustainable business?

Financial ratios can reveal a lot about a company's liquidity, activity, and profitability.

Most firms tend to be more profitable and have higher stock values when the economy is strong.

A lending institution would prefer that a firm have a _debt-equity ratio and a__ times interest earned ratio.

Markets can only be efficient if many competent analysts are performing fundamental analysis.

Which of the following would be found on a company's income statement? I. cost of goods sold II. interest expense III. cash flow from operations IV. earnings before taxes

The statement of cash flows is less influenced than the income statement by choices of accounting methods.

Positive cash flow from investing activities is typical of firms experiencing healthy growth.

Use the following information for the question(s) that follow. Patco and Ramsco are competitors in the same industry and have the following ratios. -Based on the information above, we can conclude that

Which of the following is most likely to increase in value as the result of a weakening dollar?

Economic analysis is concerned with how the general state of the economy will impact the performance of a particular company within a particular industry.

The PEG ratio divides the stock's current price by the growth rate of earnings over the preceding 12 months.

Nadine Enterprises has total assets of $240,000, a debt-equity ratio of 0.60, and a return on assets of 9%. What is the return on equity?

Worcester Corporation has a P/E ratio of 15. Natick Corporation is in the same industry as Worcester, but has a P/E ratio of 20. Possible interpretations of this discrepancy include

Briefly describe and discuss industry analysis and the motivation behind it.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 7: Analyzing Common Stocks

Which of the following are measures of liquidity? I. net working capital II. net profit margin III. current ratio IV. times interest earned

Which of the following industries best fits the definition of "rapid growth industry"?

Which of the following would be found on a company's balance sheet? I. Accounts receivable II. Interest expense III. Property plant and equipment IV. Total stockholders' equity

Briefly describe fundamental analysis and the basic assumption behind it.

Which of the following would be typical of a Statement of Cash Flows for a healthy firm in a sustainable business?

Financial ratios can reveal a lot about a company's liquidity, activity, and profitability.

Most firms tend to be more profitable and have higher stock values when the economy is strong.

A lending institution would prefer that a firm have a _____debt-equity ratio and a______ times interest earned ratio.

Markets can only be efficient if many competent analysts are performing fundamental analysis.

Which of the following would be found on a company's income statement? I. cost of goods sold II. interest expense III. cash flow from operations IV. earnings before taxes

The statement of cash flows is less influenced than the income statement by choices of accounting methods.

Positive cash flow from investing activities is typical of firms experiencing healthy growth.

Use the following information for the question(s) that follow. Patco and Ramsco are competitors in the same industry and have the following ratios. -Based on the information above, we can conclude that

Which of the following is most likely to increase in value as the result of a weakening dollar?

Economic analysis is concerned with how the general state of the economy will impact the performance of a particular company within a particular industry.

The PEG ratio divides the stock's current price by the growth rate of earnings over the preceding 12 months.

Nadine Enterprises has total assets of $240,000, a debt-equity ratio of 0.60, and a return on assets of 9%. What is the return on equity?

Worcester Corporation has a P/E ratio of 15. Natick Corporation is in the same industry as Worcester, but has a P/E ratio of 20. Possible interpretations of this discrepancy include

Briefly describe and discuss industry analysis and the motivation behind it.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

A lending institution would prefer that a firm have a _debt-equity ratio and a__ times interest earned ratio.