Exam 7: Analyzing Common Stocks

The inventory turnover rate for a firm is 14.5 as compared to the relevant industry rate of 13.2.In this case, the firm is

An investor should buy a stock only if the prevailing market price exceeds the intrinsic value of the stock.

When the economic outlook for an industrial sector is strong, the outlook for many of the stocks of firms within that sector will also be strong.

The purpose of economic analysis is to gain an insight into the underlying health or vitality of the economy and to formulate expectations about future security prices.

An investment should offer an expected return commensurate with the risk involved.

A company may appear to be profitable on its income statement, but fail to generate strong cash flows.

On September 30, the Simpson Company reported the following information on its financial statements. What is the amount of the stockholder's equity in the Simpson Company?

Generally, the market price of a stock is

Which of the following is a readily available source of industry comparisons:

Substituting EBITDA for EBIT when computing the times interest earned ratio will make the company appear

EBITDA stands for earnings before inflation, taxes, depreciation, and adjustments.

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?

If a firm has an equity multiplier of 3, this means that the firm has $3 in equity for every $1 in long-term debt.

List and explain the various stages of the growth cycle of an industry.Also discuss the merit of investing in the industry during each of the various stages.

Top-down security analysis

Fundamental analysis can only be profitable if some securities are at least temporarily mispriced.

Return on equity can be expressed mathematically as "(net profit margin)(total asset turnover)(equity multiplier)."

Which of the following are considered in the company analysis phase of a fundamental analysis of a firm? I.the composition and growth in sales II.the capital structure of the firm III.the outlook of the national economy IV.the composition and liquidity of the company's assets

A company has sales of $640,000, net profit after taxes of $23,000, and a total asset turnover of 2.5.What is the return on assets?

Investors who conduct industry analyses typically favor companies with strong market positions over companies with less secure market positions because firms with strong market positions tend to I.be price leaders. II.benefit more from economies of scale. III.have better R&D programs. IV.have lower production costs.