Question 1

The measure that indicates how efficiently assets are being used to support sales is called the

Accepted Answer

A) total asset turnover. 
B) current ratio. 
C) book value. 
D) net profit margin. 
A) total asset turnover. 
B) current ratio. 
C) book value. 
D) net profit margin.

Question 2

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.

Accepted Answer

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

Question 3

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?

Accepted Answer

A) 3.6% 
B) 4.5% 
C) 8.1% 
D) 9.0% 
A) 3.6% 
B) 4.5% 
C) 8.1% 
D) 9.0%

Question 4

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?

Accepted Answer

A) $243,000 
B) $277,000 
C) $927,000 
D) $3,217,000 
A) $243,000 
B) $277,000 
C) $927,000 
D) $3,217,000

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

On March 31, Adolpha, Inc.reported the following information on its financial statements.   What is the available net working capital for Adolpha, Inc.?

Accepted Answer

A) -$253,844 
B) -$132,366 
C) $121,578 
D) $1,873,020 
A) -$253,844 
B) -$132,366 
C) $121,578 
D) $1,873,020

Question 7

JJ Industries has a P/E ratio of 18 and an EPS of $0.93.This means that JJ's stock is currently selling for

Accepted Answer

A) $16.74 per share. 
B) $17.07 per share. 
C) $18.00 per share. 
D) $19.35 per share. 
A) $16.74 per share. 
B) $17.07 per share. 
C) $18.00 per share. 
D) $19.35 per share.

Question 8

The debt to equity ratio should be approximately the same across all industrial sectors.

Accepted Answer

A) True 
 B)False

Question 9

The top down approach to security analysis starts with top management and then examines production and marketing strategies.

Accepted Answer

A) True 
 B)False

Question 10

A total asset turnover of 3 means that every

Accepted Answer

A) $1 in sales is supported by $3 of assets. 
B) $3 in assets produces $1 in net earnings. 
C) $1 in total assets is replaced on average every 3 years. 
D) $1 in assets produces $3 in sales. 
A) $1 in sales is supported by $3 of assets. 
B) $3 in assets produces $1 in net earnings. 
C) $1 in total assets is replaced on average every 3 years. 
D) $1 in assets produces $3 in sales.

Question 11

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 start to rise before the end of a recession. 
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 start to rise before the end of a recession. 
D) Changes in stock prices generally lag changes in the economy.

Question 12

Return on equity (ROE)is computed by dividing net income by the market value of equity.

Accepted Answer

A) True 
 B)False

Question 13

Advocates of the efficient market hypothesis would argue that it is virtually impossible for any investor to consistently outperform the market.

Accepted Answer

A) True 
 B)False

Question 14

Company X and Company Y are in the same industry and have the following ratios.   
Discuss the relative natures of the two companies in terms of risk and return.Identify the more growth-oriented firm and justify your selection.Support your discussion and conclusions by referring to the ratios.

Accepted Answer

Company Y has more financial risk becaus

Question 15

Which one of the following is likely to have a negative effect on stock prices?

Accepted Answer

A) falling interest rates 
B) a decrease in the money supply (M2) 
C) low inflation 
D) a decrease in the unemployment rate 
A) falling interest rates 
B) a decrease in the money supply (M2) 
C) low inflation 
D) a decrease in the unemployment rate

Question 16

Which of the following may be signs of future problems for a company?
I.Inventories growing faster than sales.
II.Rapidly increasing debt to equity ratio.
III.Cash flow from operations is higher than net income.
IV.Current liabilities increasing faster than current assets.

Accepted Answer

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

Question 17

The normal sequence in performing top down analysis is

Accepted Answer

A) competition, consumer demand, threat of substitute products. 
B) market conditions, risk, company fundamentals. 
C) economy, industry, company. 
D) profitability, efficiency, liquidity. 
A) competition, consumer demand, threat of substitute products. 
B) market conditions, risk, company fundamentals. 
C) economy, industry, company. 
D) profitability, efficiency, liquidity.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Industries in the rapid expansion stage will be especially sensitive to a slowing economy.

Accepted Answer

A) True 
 B)False

Question 20

The government has an expansionary economic policy when it

Accepted Answer

A) increases taxes. 
B) increases government spending. 
C) promotes rising interest rates. 
D) limits exports of goods and services. 
A) increases taxes. 
B) increases government spending. 
C) promotes rising interest rates. 
D) limits exports of goods and services.

The measure that indicates how efficiently assets are being used to support sales is called the

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?

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?

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.

On March 31, Adolpha, Inc.reported the following information on its financial statements. What is the available net working capital for Adolpha, Inc.?

JJ Industries has a P/E ratio of 18 and an EPS of $0.93.This means that JJ's stock is currently selling for

The debt to equity ratio should be approximately the same across all industrial sectors.

The top down approach to security analysis starts with top management and then examines production and marketing strategies.

A total asset turnover of 3 means that every

Which one of the following statements is correct?

Return on equity (ROE)is computed by dividing net income by the market value of equity.

Advocates of the efficient market hypothesis would argue that it is virtually impossible for any investor to consistently outperform the market.

Company X and Company Y are in the same industry and have the following ratios. Discuss the relative natures of the two companies in terms of risk and return.Identify the more growth-oriented firm and justify your selection.Support your discussion and conclusions by referring to the ratios.

Which one of the following is likely to have a negative effect on stock prices?

Which of the following may be signs of future problems for a company? I.Inventories growing faster than sales. II.Rapidly increasing debt to equity ratio. III.Cash flow from operations is higher than net income. IV.Current liabilities increasing faster than current assets.

The normal sequence in performing top down analysis is

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

Industries in the rapid expansion stage will be especially sensitive to a slowing economy.

The government has an expansionary economic policy when 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

The measure that indicates how efficiently assets are being used to support sales is called the

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?

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?

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.

On March 31, Adolpha, Inc.reported the following information on its financial statements. What is the available net working capital for Adolpha, Inc.?

JJ Industries has a P/E ratio of 18 and an EPS of $0.93.This means that JJ's stock is currently selling for

The debt to equity ratio should be approximately the same across all industrial sectors.

The top down approach to security analysis starts with top management and then examines production and marketing strategies.

A total asset turnover of 3 means that every

Which one of the following statements is correct?

Return on equity (ROE)is computed by dividing net income by the market value of equity.

Advocates of the efficient market hypothesis would argue that it is virtually impossible for any investor to consistently outperform the market.

Company X and Company Y are in the same industry and have the following ratios. Discuss the relative natures of the two companies in terms of risk and return.Identify the more growth-oriented firm and justify your selection.Support your discussion and conclusions by referring to the ratios.

Which one of the following is likely to have a negative effect on stock prices?

Which of the following may be signs of future problems for a company? I.Inventories growing faster than sales. II.Rapidly increasing debt to equity ratio. III.Cash flow from operations is higher than net income. IV.Current liabilities increasing faster than current assets.

The normal sequence in performing top down analysis is

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

Industries in the rapid expansion stage will be especially sensitive to a slowing economy.

The government has an expansionary economic policy when 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