Question 1

Ratio analysis is the study of the relationships between various financial statement accounts.

Accepted Answer

A) True 
 B)False  True

Question 2

Which one of the following is a leverage measure?

Accepted Answer

A)  times interest earned 
B)  net working capital 
C)  return on equity 
D)  net profit margin 
A)  times interest earned 
B)  net working capital 
C)  return on equity 
D)  net profit margin A

Question 3

A firm with a very low debt-equity ratio has a low risk of defaulting on its loans.

Accepted Answer

A) True 
 B)False  True

Question 4

Financial ratios
I.allow comparisons across firms without concern over firm size.
II.can compare a firm's operating and financial status to industry norms.
III.reflect the future outlook of a firm based on analysts projections.
IV.look at the liquidity, activity, leverage, profitability and market measures of a firm.

Accepted Answer

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

Question 5

A low cash realization ratio may reveal liquidity problems in a profitable company.

Accepted Answer

A) True 
 B)False

Question 6

The cash realization ratio (cash flow from operating activities divided by net income)is a useful measure of

Accepted Answer

A)  quality of earnings. 
B)  liquidity. 
C)  leverage. 
D)  distortion of earnings by inflation. 
A)  quality of earnings. 
B)  liquidity. 
C)  leverage. 
D)  distortion of earnings by inflation.

Question 7

The business cycle reflects economic changes only in the industrial sectors of the economy.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following statements is correct?

Accepted Answer

A)  Stock prices are independent of the economic cycle. 
B)  Stock prices change simultaneously with the economy. 
C)  Stock prices are often used to predict changes in the economy. 
D)  Changes in stock prices generally lag changes in the economy. 
A)  Stock prices are independent of the economic cycle. 
B)  Stock prices change simultaneously with the economy. 
C)  Stock prices are often used to predict changes in the economy. 
D)  Changes in stock prices generally lag changes in the economy.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Briefly describe and discuss both industry analysis and fundamental analysis.

Accepted Answer

Industry analysis.
1.focuses on the acti

Question 11

The Allied Computer Co.has sales of $300 million, a net profit margin of 9%, and 10 million shares of common stock outstanding.It has no preferred stock outstanding.If Allied stock trades at $50 per share, it has a price/earnings ratio of 20.9.

Accepted Answer

A) True 
 B)False

Question 12

The stage in an industry's growth cycle in which product acceptance is spreading, investors can foresee the industry's future, and overall economic variables have little to do with the industry's overall performance, is known as the

Accepted Answer

A)  initial development stage. 
B)  rapid expansion stage. 
C)  mature growth stage. 
D)  stability or decline stage. 
A)  initial development stage. 
B)  rapid expansion stage. 
C)  mature growth stage. 
D)  stability or decline stage.

Question 13

For their last fiscal year, the Short Company reported the following information.
 
What is the accounts receivables turnover rate?

Accepted Answer

A)  0.8 
B)  2.8 
C)  4.5 
D)  7.3 
A)  0.8 
B)  2.8 
C)  4.5 
D)  7.3

Question 14

Fundamental analysis encompasses return, but not risk, in the valuation process.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following is a correct description of an economic measure?

Accepted Answer

A)  The consumer price index is a monthly indicator of changes in the price of goods at various stages of production. 
B)  The monthly estimate of total sales by the Commerce Department is known as the consumer price index. 
C)  The unemployment rate shows the number of payroll jobs that exist in the economy. 
D)  The amount of funds in circulation, in checking, savings and money market accounts and in CDs is referred to as the money supply. 
A)  The consumer price index is a monthly indicator of changes in the price of goods at various stages of production. 
B)  The monthly estimate of total sales by the Commerce Department is known as the consumer price index. 
C)  The unemployment rate shows the number of payroll jobs that exist in the economy. 
D)  The amount of funds in circulation, in checking, savings and money market accounts and in CDs is referred to as the money supply.

Question 16

Investors are most interested in which one of the following ratios?

Accepted Answer

A)  return on assets 
B)  current ratio 
C)  net profit margin 
D)  return on equity 
A)  return on assets 
B)  current ratio 
C)  net profit margin 
D)  return on equity

Question 17

A high P/E ratio may be an indication that a stock is overpriced.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following measures excludes non-cash charges against income.

Accepted Answer

A)  core earnings 
B)  EBITDA 
C)  net income before taxes 
D)  Income from operating activities 
A)  core earnings 
B)  EBITDA 
C)  net income before taxes 
D)  Income from operating activities

Question 19

Some investment analysts believe that the market processes new information so well and so quickly that securities trade very close to their intrinsic values at all times.These analysts are said to be advocates of

Accepted Answer

A)  fundamental analysis. 
B)  sector analysis. 
C)  the efficient market hypothesis. 
D)  the prevailing price hypothesis. 
A)  fundamental analysis. 
B)  sector analysis. 
C)  the efficient market hypothesis. 
D)  the prevailing price hypothesis.

Question 20

Cash flow from operations

Accepted Answer

A)  represents the amount of cash generated by the company. 
B)  is the least important section of the Statement of Cash Flows. 
C)  is the amount of cash acquired from the borrowing activities of the firm. 
D)  represents the cash flows from the purchase and sale of long-term assets. 
A)  represents the amount of cash generated by the company. 
B)  is the least important section of the Statement of Cash Flows. 
C)  is the amount of cash acquired from the borrowing activities of the firm. 
D)  represents the cash flows from the purchase and sale of long-term assets.

Ratio analysis is the study of the relationships between various financial statement accounts.

Which one of the following is a leverage measure?

A firm with a very low debt-equity ratio has a low risk of defaulting on its loans.

A low cash realization ratio may reveal liquidity problems in a profitable company.

The cash realization ratio (cash flow from operating activities divided by net income)is a useful measure of

The business cycle reflects economic changes only in the industrial sectors of the economy.

Which one of the following statements is correct?

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

Briefly describe and discuss both industry analysis and fundamental analysis.

The Allied Computer Co.has sales of $300 million, a net profit margin of 9%, and 10 million shares of common stock outstanding.It has no preferred stock outstanding.If Allied stock trades at $50 per share, it has a price/earnings ratio of 20.9.

The stage in an industry's growth cycle in which product acceptance is spreading, investors can foresee the industry's future, and overall economic variables have little to do with the industry's overall performance, is known as the

For their last fiscal year, the Short Company reported the following information. What is the accounts receivables turnover rate?

Fundamental analysis encompasses return, but not risk, in the valuation process.

Which one of the following is a correct description of an economic measure?

Investors are most interested in which one of the following ratios?

A high P/E ratio may be an indication that a stock is overpriced.

Which of the following measures excludes non-cash charges against income.

Some investment analysts believe that the market processes new information so well and so quickly that securities trade very close to their intrinsic values at all times.These analysts are said to be advocates of

Cash flow from operations

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 7: Analyzing Common Stocks

Ratio analysis is the study of the relationships between various financial statement accounts.

Which one of the following is a leverage measure?

A firm with a very low debt-equity ratio has a low risk of defaulting on its loans.

A low cash realization ratio may reveal liquidity problems in a profitable company.

The cash realization ratio (cash flow from operating activities divided by net income)is a useful measure of

The business cycle reflects economic changes only in the industrial sectors of the economy.

Which one of the following statements is correct?

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

Briefly describe and discuss both industry analysis and fundamental analysis.

The Allied Computer Co.has sales of $300 million, a net profit margin of 9%, and 10 million shares of common stock outstanding.It has no preferred stock outstanding.If Allied stock trades at $50 per share, it has a price/earnings ratio of 20.9.

The stage in an industry's growth cycle in which product acceptance is spreading, investors can foresee the industry's future, and overall economic variables have little to do with the industry's overall performance, is known as the

For their last fiscal year, the Short Company reported the following information. What is the accounts receivables turnover rate?

Fundamental analysis encompasses return, but not risk, in the valuation process.

Which one of the following is a correct description of an economic measure?

Investors are most interested in which one of the following ratios?

A high P/E ratio may be an indication that a stock is overpriced.

Which of the following measures excludes non-cash charges against income.

Some investment analysts believe that the market processes new information so well and so quickly that securities trade very close to their intrinsic values at all times.These analysts are said to be advocates of

Cash flow from operations

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters