Exam 7: Analyzing Common Stocks

Investment analysts who believe that a thorough investigation of a company's financial condition, product development, management and other intrinsic factors can discover stocks that are priced above or below their intrinsic value are advocates of

In seeking potential stock investments, most analysts look for companies that have PEG ratios that are equal to or less than one.

Which of the following business es will be positively impacted by a weak dollar?

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

Historical comparisons will reveal whether a company's performance is improving or deteriorating.

Briefly describe fundamental analysis and the basic assumption behind it.

One of the basic premises of security analysis, and in particular fundamental analysis, is that

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

A firm with a very low debt-equity ratio might be able to increase return on equity by taking on additional debt.

Which stage of an industry's growth cycle is most influenced by economic events?

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.

Which stage of an industry's growth cycle is interesting only for potentially high dividend payouts?

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

The Federal Reserve through monetary policy can help expand the economy by

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

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 for a firm as well as past performance. IV. look at the liquidity, activity, leverage, profitability and market measures of a firm.

The balance sheet summarizes the company's operations over the last fiscal year.

A comparison of a firm's current financial ratios to those of prior years allows one to

Cash flow from operations

Fundamental analysis is based on the presumption that the value of a stock is influenced by the financial performance of the issuing company.