Question 1

What might cause an industry's sales to decline?

Accepted Answer

A)  Changes in consumer tastes 
B)  Product obsolescence 
C)  Growth of substitute products 
D)  Sluggish economic growth 
E)  All of the above 
A)  Changes in consumer tastes 
B)  Product obsolescence 
C)  Growth of substitute products 
D)  Sluggish economic growth 
E)  All of the above

Question 2

Exhibit 13.1
Use the Information Below for the Following Problem(S)
Assume that you are an analyst for the U.S. Autoparts Industry. Consider the following information that you propose to use to obtain an estimate of year 2002 EPS for the U.S. Autoparts Industry:
 $\begin{array}{lrr}
\begin{array}{l}
\
\
\text{Personal consumption expenditures}\
\text{Personal consumption expenditures}\ \text{growth}\
\text{Industry Sales per share}\
\text{Industry Operating profit margin}\
\text{Industry Depreciation/Fixed Assets}\
\text{Industry Fixed asset turnover}\
\text{Interest rate}\
\text{Industry Total asset turnover}\
\text{Industry Debt/Total assets}\
\text{Industry Tax rate}\
\end{array}\
\begin{array}{r}
\
\text{Year 2003}\
\hline
\text{\$6,800 Billion}\\\
 \$ 525 \\\\\\\\
\end{array}\
\begin{array}{r}
Estimated\
\text{Year 2004}\
\hline\ 1.5 \% \\\
 15 \% \
8.25 \% \
3\
6 \% \
1.2 \
45 \% \
36\%
\end{array}\
\end{array}$
 
In addition a regression analysis indicates the following relationship between growth in industry sales per share and personal consumption expenditures (PCE) growth is
%D Sales per share = 0.02 + 1.5(%DPCE)
-Refer to Exhibit 13.1.Estimate the industry sales per share for the year 2004.

Accepted Answer

A)  $574.9 
B)  $600.0 
C)  $585.03 
D)  $625 
E)  $550 
A)  $574.9 
B)  $600.0 
C)  $585.03 
D)  $625 
E)  $550

Question 3

While there is substantial dispersion in industry risk over periods of time,there is consistency in the industry risk during a period of time.

Accepted Answer

A) True 
 B)False

Question 4

Risk measures for different industries remain fairly constant over time so historical risk analysis can be useful when estimating future risk.

Accepted Answer

A) True 
 B)False

Question 5

"Downsizing" of corporate America in the 1990s is an example of structural change.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements regarding cyclical industries is true?

Accepted Answer

A)  Cyclical industries are affected by changes in consumer sentiment. 
B)  Cyclical industries are not affected by the consumer's willingness to borrow and spend money. 
C)  Cyclical industries often outperform other sectors during a recession. 
D)  All of the above statements are true. 
E)  None of the above statements are true. 
A)  Cyclical industries are affected by changes in consumer sentiment. 
B)  Cyclical industries are not affected by the consumer's willingness to borrow and spend money. 
C)  Cyclical industries often outperform other sectors during a recession. 
D)  All of the above statements are true. 
E)  None of the above statements are true.

Question 7

Once it becomes clear the economy is recovering,

Accepted Answer

A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities. 
A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities.

Question 8

Switching industry groups over the course of a business cycle is known as a cyclical strategy.

Accepted Answer

A) True 
 B)False

Question 9

Global industry analysis must evaluate the effects not only of world supply,demand and cost components for an industry,but also different valuation levels due to accounting conventions and the impact of exchange rates.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 13.1
Use the Information Below for the Following Problem(S)
Assume that you are an analyst for the U.S. Autoparts Industry. Consider the following information that you propose to use to obtain an estimate of year 2002 EPS for the U.S. Autoparts Industry:
 $\begin{array}{lrr}
\begin{array}{l}
\
\
\text{Personal consumption expenditures}\
\text{Personal consumption expenditures}\ \text{growth}\
\text{Industry Sales per share}\
\text{Industry Operating profit margin}\
\text{Industry Depreciation/Fixed Assets}\
\text{Industry Fixed asset turnover}\
\text{Interest rate}\
\text{Industry Total asset turnover}\
\text{Industry Debt/Total assets}\
\text{Industry Tax rate}\
\end{array}\
\begin{array}{r}
\
\text{Year 2003}\
\hline
\text{\$6,800 Billion}\\\
 \$ 525 \\\\\\\\
\end{array}\
\begin{array}{r}
Estimated\
\text{Year 2004}\
\hline\ 1.5 \% \\\
 15 \% \
8.25 \% \
3\
6 \% \
1.2 \
45 \% \
36\%
\end{array}\
\end{array}$
 
In addition a regression analysis indicates the following relationship between growth in industry sales per share and personal consumption expenditures (PCE) growth is
%D Sales per share = 0.02 + 1.5(%DPCE)
-Refer to Exhibit 13.1.Calculate the per share interest rate charge for the year 2004.

Accepted Answer

A)  $12.93 
B)  $17.72 
C)  $10.07 
D)  $13.76 
E)  $18.59 
A)  $12.93 
B)  $17.72 
C)  $10.07 
D)  $13.76 
E)  $18.59

Question 11

When forecasting industry sales it can be useful to

Accepted Answer

A)  Utilize the industry life cycle. 
B)  Use input-output analysis. 
C)  Use the relationship between an industry and the aggregate economy. 
D)  All of the above. 
E)  None of the above. 
A)  Utilize the industry life cycle. 
B)  Use input-output analysis. 
C)  Use the relationship between an industry and the aggregate economy. 
D)  All of the above. 
E)  None of the above.

Question 12

When compared to the overall market P/E,the retail store P/E was estimated to be ____ and near the ____ of the range.

Accepted Answer

A)  More volatile, low end 
B)  More volatile, high end 
C)  Less volatile, low end 
D)  Less volatile, high end 
E)  Equally volatile, middle 
A)  More volatile, low end 
B)  More volatile, high end 
C)  Less volatile, low end 
D)  Less volatile, high end 
E)  Equally volatile, middle

Question 13

The ____ of an industry is a function of retention rate and return on equity.

Accepted Answer

A)  Expected return 
B)  Expected business risk 
C)  Expected financial risk 
D)  Expected growth rate 
E)  Expected sales volatility 
A)  Expected return 
B)  Expected business risk 
C)  Expected financial risk 
D)  Expected growth rate 
E)  Expected sales volatility

Question 14

During a recession which industry is most likely to excel?

Accepted Answer

A)  Consumer staples 
B)  Consumer durables 
C)  Basic industries 
D)  Financial stocks 
E)  Capital goods 
A)  Consumer staples 
B)  Consumer durables 
C)  Basic industries 
D)  Financial stocks 
E)  Capital goods

Question 15

Exhibit 13.1
Use the Information Below for the Following Problem(S)
Assume that you are an analyst for the U.S. Autoparts Industry. Consider the following information that you propose to use to obtain an estimate of year 2002 EPS for the U.S. Autoparts Industry:
 $\begin{array}{lrr}
\begin{array}{l}
\
\
\text{Personal consumption expenditures}\
\text{Personal consumption expenditures}\ \text{growth}\
\text{Industry Sales per share}\
\text{Industry Operating profit margin}\
\text{Industry Depreciation/Fixed Assets}\
\text{Industry Fixed asset turnover}\
\text{Interest rate}\
\text{Industry Total asset turnover}\
\text{Industry Debt/Total assets}\
\text{Industry Tax rate}\
\end{array}\
\begin{array}{r}
\
\text{Year 2003}\
\hline
\text{\$6,800 Billion}\\\
 \$ 525 \\\\\\\\
\end{array}\
\begin{array}{r}
Estimated\
\text{Year 2004}\
\hline\ 1.5 \% \\\
 15 \% \
8.25 \% \
3\
6 \% \
1.2 \
45 \% \
36\%
\end{array}\
\end{array}$
 
In addition a regression analysis indicates the following relationship between growth in industry sales per share and personal consumption expenditures (PCE) growth is
%D Sales per share = 0.02 + 1.5(%DPCE)
-Refer to Exhibit 13.1.Calculate industry total assets per share for the year 2004.

Accepted Answer

A)  $450 
B)  $565.67 
C)  $513.58 
D)  $479.07 
E)  $385.77 
A)  $450 
B)  $565.67 
C)  $513.58 
D)  $479.07 
E)  $385.77

Question 16

Exhibit 13.1
Use the Information Below for the Following Problem(S)
Assume that you are an analyst for the U.S. Autoparts Industry. Consider the following information that you propose to use to obtain an estimate of year 2002 EPS for the U.S. Autoparts Industry:
 $\begin{array}{lrr}
\begin{array}{l}
\
\
\text{Personal consumption expenditures}\
\text{Personal consumption expenditures}\ \text{growth}\
\text{Industry Sales per share}\
\text{Industry Operating profit margin}\
\text{Industry Depreciation/Fixed Assets}\
\text{Industry Fixed asset turnover}\
\text{Interest rate}\
\text{Industry Total asset turnover}\
\text{Industry Debt/Total assets}\
\text{Industry Tax rate}\
\end{array}\
\begin{array}{r}
\
\text{Year 2003}\
\hline
\text{\$6,800 Billion}\\\
 \$ 525 \\\\\\\\
\end{array}\
\begin{array}{r}
Estimated\
\text{Year 2004}\
\hline\ 1.5 \% \\\
 15 \% \
8.25 \% \
3\
6 \% \
1.2 \
45 \% \
36\%
\end{array}\
\end{array}$
 
In addition a regression analysis indicates the following relationship between growth in industry sales per share and personal consumption expenditures (PCE) growth is
%D Sales per share = 0.02 + 1.5(%DPCE)
-Refer to Exhibit 13.1.Calculate the industry EBT per share for the year 2004.

Accepted Answer

A)  $53.29 
B)  $67.89 
C)  $68.75 
D)  $59.63 
E)  $57.49 
A)  $53.29 
B)  $67.89 
C)  $68.75 
D)  $59.63 
E)  $57.49

Question 17

At the initial stage of an economic recovery,

Accepted Answer

A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities. 
A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities.

Question 18

Studies of industries indicate that their past performance can be useful in predicting future performance.

Accepted Answer

A) True 
 B)False

Question 19

In which industrial life cycle stage do sales correlate highly with an economic series or the economy in general?

Accepted Answer

A)  Pioneering development 
B)  Rapidly accelerating growth 
C)  Mature growth 
D)  Stabilization and market maturity 
E)  Deceleration of growth and decline 
A)  Pioneering development 
B)  Rapidly accelerating growth 
C)  Mature growth 
D)  Stabilization and market maturity 
E)  Deceleration of growth and decline

Question 20

Toward the business cycle peak

Accepted Answer

A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities. 
A)  Financial stocks rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  Consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  Capital goods stocks rise on expectation of increases in business capital spending. 
D)  Basic materials stocks rise on expectation of rising profit margins. 
E)  Consumer staple stocks rise on expectations that consumers will continue to spend on necessities.

Exam 13: Industry Analysis

What might cause an industry's sales to decline?

While there is substantial dispersion in industry risk over periods of time,there is consistency in the industry risk during a period of time.

Risk measures for different industries remain fairly constant over time so historical risk analysis can be useful when estimating future risk.

"Downsizing" of corporate America in the 1990s is an example of structural change.

Which of the following statements regarding cyclical industries is true?

Once it becomes clear the economy is recovering,

Switching industry groups over the course of a business cycle is known as a cyclical strategy.

Global industry analysis must evaluate the effects not only of world supply,demand and cost components for an industry,but also different valuation levels due to accounting conventions and the impact of exchange rates.

When forecasting industry sales it can be useful to

When compared to the overall market P/E,the retail store P/E was estimated to be ____ and near the ____ of the range.

The ____ of an industry is a function of retention rate and return on equity.

During a recession which industry is most likely to excel?

At the initial stage of an economic recovery,

Studies of industries indicate that their past performance can be useful in predicting future performance.

In which industrial life cycle stage do sales correlate highly with an economic series or the economy in general?

Toward the business cycle peak

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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When compared to the overall market P/E,the retail store P/E was estimated to be and near the of the range.