Exam 15: Company Analysis

When analyzing stocks, the variable of interest to most investors is:

Investors following a GARP strategy prefer stocks with higher PEG ratios.

Which of the following is not one of the parts of the cash flow statement?

Other things being equal, as k rises, the P/E ratio will also rise.

Which of the following is shown on the balance sheet on a lower of cost or market value basis?

Which statement about the quality of reported EPS is false?

Leverage can magnify returns to the stockholders but also increase potential losses to the stockholders.

In modern investment analysis, the market risk of a stock is measured by its:

Upon analyzing the financial statements of Jain Industries, you discover that it is currently retaining 60 percent of its earnings (which were $6 this past year) and is earning a ROE of almost 20 percent. Assuming a risk-free rate of 4 percent and a risk-premium for Jain of 8 percent, how much would you be willing to pay for Jain Industries stock on the basis of the P/E ratio approach?

The auditor's report guarantees the accuracy of reported earnings.

If business risk decreases for Megabucks, Inc., its P/E should:

Should an investor seek companies with low P/Es or high P/Es?

The cash flow statement consists of the following parts:

Some companies, tend to provide low guidance, contributing toward consistently positive earnings surprises.

The risk-free rate is 10 percent, and the expected return for the stock market is 16 percent. Evergreen Inc. has a beta of 1.1, and investors expect dividends and earnings to grow at 8 percent per year. The current dividend is $1.20 and the payout ratio is 50 percent. (a) Calculate the P/E ratio for Evergreen Inc. (b) Estimate the price of the stock for the next year using the multiplier model.

Which of the following methods of security analysis involves the use of a computer program to imitate the brain?

In what portion of the statement of cash flows would an investor look to find whether a firm had repurchased common shares?

The SST Corporation just reported net income of $37.8 million and total assets of $432 million with 30 million shares outstanding. The firm has an equity multiplier of 1.6 and a dividend payout ratio of 70%. Assume the firm's ratios are expected to hold in the future. SST has a beta of 1.2, T-bonds are yielding 3% and the market risk premium is 6.5%. Based on the constant growth model, what is the firm's estimated intrinsic value?

Do stock prices increase when companies announce earnings above the consensus forecast? Explain why or why not.

Find the P/E ratio of a stock with an ROE of 15 percent, a book value per share of $5.00, and a current stock price of $30.00.