Exam 7: Analyzing Common Stocks

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

To predict the demand for an industrial sector, it is essential to understand the economic forces that affect the industry.

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

Which of the following factors are considered when analyzing an industry? I.the nature and conditions of governmental regulations II.the involvement and relations, if any, with labor unions III.the development of new technologies relevant to the industry IV.the extent of competition within the industry

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

Company analysis is only concerned with how a company has performed in the past.

To determine whether a company is using leverage effectively, an analyst should consider

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.provide insights into a companies future. IV.look at the liquidity, activity, leverage, profitability and market measures of a firm.

Which of the following would be found on a company's balance sheet? I.Accounts receivable II.Interest expense III.Property plant and equipment IV.Total stockholders' equity

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

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

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

Banks can use the times interest earned ratio as a measure of a borrower's ability to repay their loan.

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

Which of the following businesses will be negatively impacted by a strong dollar?

Which of the following would be typical of a Statement of Cash Flows for a healthy firm in a sustainable business?

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

The three steps in determining a stock's intrinsic value are I.estimating the stock's future cash flows. II.estimating the risk associated with future cash flows. III.careful analysis of patterns in the stock's recent price history. IV.estimating an appropriate discount rate to apply to future cash flows.

Fundamental analysis involves the in-depth study of the

The statement of cash flows is less influenced than the income statement by choices of accounting methods.