Question 1

Investors who believe that most securities are efficiently priced should not not be concerned with fundamental analysis.

Accepted Answer

A) True 
 B)False

Question 2

The rapid expansion phase of an industry is characterized by

Accepted Answer

A) extreme sensitivity to interest rates and other economic factors. 
B) high returns and relatively low risks. 
C) willingness of investors to buy almost any stock associated with the industry. 
D) many decades of sustained above average growth. 
A) extreme sensitivity to interest rates and other economic factors. 
B) high returns and relatively low risks. 
C) willingness of investors to buy almost any stock associated with the industry. 
D) many decades of sustained above average growth.

Question 3

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

Accepted Answer

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a readily available source of industry comparisons?
I.Standard & Poor's
II.MSN Money, Yahoo Finance and other financial portals
III.Mergent (Moody's)
IV.The Wall Street Journal

Accepted Answer

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

Question 6

Top-down security analysis

Accepted Answer

A) starts with the fundamental analysis of a firm. 
B) includes economic, industry, and fundamental analysis. 
C) concentrates on the competency of the senior management of a firm. 
D) centers on the past performance of a firm. 
A) starts with the fundamental analysis of a firm. 
B) includes economic, industry, and fundamental analysis. 
C) concentrates on the competency of the senior management of a firm. 
D) centers on the past performance of a firm.

Question 7

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 8

Which of the following directly impact return on equity?
I.net profit margin
II.leverage
III.return on assets
IV.cash flow from investment activities

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 9

The intrinsic value of a security is based on the
I.amount of risk.
II.current market value of the security.
III.discount rate applicable to the security.
IV.estimated future cash flows from the security.

Accepted Answer

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

Question 10

The income statement indicates how successfully a company has utilized its assets.

Accepted Answer

A) True 
 B)False

Question 11

Rising interest rates tend to

Accepted Answer

A) contract the level of economic activity. 
B) increase the level of business investment. 
C) indicate governmental expansion of the economy. 
D) signal the trough of a recessionary market. 
A) contract the level of economic activity. 
B) increase the level of business investment. 
C) indicate governmental expansion of the economy. 
D) signal the trough of a recessionary market.

Question 12

If a company's ROA is high, then an investor can assume that the company

Accepted Answer

A) is in danger of defaulting on its loans. 
B) pays a high dividend. 
C) is profitable. 
D) has more equity than debt in its capital structure. 
A) is in danger of defaulting on its loans. 
B) pays a high dividend. 
C) is profitable. 
D) has more equity than debt in its capital structure.

Question 13

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 14

Rising corporate profits are likely to have the greatest effect on which of the following industrial sectors?

Accepted Answer

A) business equipment 
B) defense 
C) food and agriculture 
D) consumer durables 
A) business equipment 
B) defense 
C) food and agriculture 
D) consumer durables

Question 15

The quick ratio differs from the current current ratio in that accounts receivable are excluded from current assets.

Accepted Answer

A) True 
 B)False

Question 16

Which one of the following statements concerning accounting reports is correct?

Accepted Answer

A) The income statement reflects the position of a firm as of a single point in time. 
B) The total equity of a firm is equal to the total assets plus the total liabilities. 
C) The statement of cash flows identifies both the sources and the uses of cash. 
D) The income statement reflects the amount of cash available for investment and financing activities. 
A) The income statement reflects the position of a firm as of a single point in time. 
B) The total equity of a firm is equal to the total assets plus the total liabilities. 
C) The statement of cash flows identifies both the sources and the uses of cash. 
D) The income statement reflects the amount of cash available for investment and financing activities.

Question 17

Name at least three economic variables that the affect the stock market and describe their effects.

Accepted Answer

Inflation: high inflation increases the

Question 18

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 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

Well managed companies rarely reach the decline stage because

Accepted Answer

A) the world's population is growing. 
B) they continuously develop new products to meet the needs of changing markets. 
C) consumers remain loyal to established brands. 
D) all of the above. 
A) the world's population is growing. 
B) they continuously develop new products to meet the needs of changing markets. 
C) consumers remain loyal to established brands. 
D) all of the above.

Investors who believe that most securities are efficiently priced should not not be concerned with fundamental analysis.

The rapid expansion phase of an industry is characterized by

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

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

Which of the following is a readily available source of industry comparisons? I.Standard & Poor's II.MSN Money, Yahoo Finance and other financial portals III.Mergent (Moody's) IV.The Wall Street Journal

Top-down security analysis

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

Which of the following directly impact return on equity? I.net profit margin II.leverage III.return on assets IV.cash flow from investment activities

The intrinsic value of a security is based on the I.amount of risk. II.current market value of the security. III.discount rate applicable to the security. IV.estimated future cash flows from the security.

The income statement indicates how successfully a company has utilized its assets.

Rising interest rates tend to

If a company's ROA is high, then an investor can assume that the company

Rising corporate profits are likely to have the greatest effect on which of the following industrial sectors?

The quick ratio differs from the current current ratio in that accounts receivable are excluded from current assets.

Which one of the following statements concerning accounting reports is correct?

Name at least three economic variables that the affect the stock market and describe their effects.

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

Well managed companies rarely reach the decline stage because

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

Investors who believe that most securities are efficiently priced should not not be concerned with fundamental analysis.

The rapid expansion phase of an industry is characterized by

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

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

Which of the following is a readily available source of industry comparisons? I.Standard & Poor's II.MSN Money, Yahoo Finance and other financial portals III.Mergent (Moody's) IV.The Wall Street Journal

Top-down security analysis

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

Which of the following directly impact return on equity? I.net profit margin II.leverage III.return on assets IV.cash flow from investment activities

The intrinsic value of a security is based on the I.amount of risk. II.current market value of the security. III.discount rate applicable to the security. IV.estimated future cash flows from the security.

The income statement indicates how successfully a company has utilized its assets.

Rising interest rates tend to

If a company's ROA is high, then an investor can assume that the company

Rising corporate profits are likely to have the greatest effect on which of the following industrial sectors?

The quick ratio differs from the current current ratio in that accounts receivable are excluded from current assets.

Which one of the following statements concerning accounting reports is correct?

Name at least three economic variables that the affect the stock market and describe their effects.

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

Well managed companies rarely reach the decline stage because

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