Question 1

A firm's sustainable growth rate can be calculated as the product of:

Accepted Answer

A)  return on assets and the return on equity. 
B)  dividend payout ratio and leverage. 
C)  retention rate and the return on equity. 
D)  net profit margin and asset turnover. 
A)  return on assets and the return on equity. 
B)  dividend payout ratio and leverage. 
C)  retention rate and the return on equity. 
D)  net profit margin and asset turnover. C

Question 2

EPS are of higher quality if:

Accepted Answer

A)  the company is a blue chip. 
B)  the auditor's reputation is high. 
C)  they were derived using conservative principles. 
D)  FASB has approved them. 
A)  the company is a blue chip. 
B)  the auditor's reputation is high. 
C)  they were derived using conservative principles. 
D)  FASB has approved them. C

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

ROA is the product of:

Accepted Answer

A) net income margin and asset turnover. 
B) book value and asset turnover. 
C) leverage and book value. 
D) net income margin and leverage. 
A) net income margin and asset turnover. 
B) book value and asset turnover. 
C) leverage and book value. 
D) net income margin and leverage.

Question 5

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

Accepted Answer

A) Cash flow from operating activities 
B) Cash flow from sales activities 
C) Cash flow from investing activities 
D) Cash flow from financing activities 
A) Cash flow from operating activities 
B) Cash flow from sales activities 
C) Cash flow from investing activities 
D) Cash flow from financing activities

Question 6

The investment advisory service best known for evaluating mutual funds is:

Accepted Answer

A) Standard & Poor's. 
B) Moody's. 
C) Morningstar. 
D) Value Line Investment Survey. 
A) Standard & Poor's. 
B) Moody's. 
C) Morningstar. 
D) Value Line Investment Survey.

Question 7

Which of the following is true regarding earnings forecasts made by analysts versus forecasts made by statistical models? The evidence tends to:

Accepted Answer

A) support analysts' forecasts in terms of accuracy over statistical models. 
B) support statistical models' forecasts in terms of accuracy over analysts' forecasts. 
C) support both types of forecasts equally. 
D) not support either type of forecast in terms of accuracy. 
A) support analysts' forecasts in terms of accuracy over statistical models. 
B) support statistical models' forecasts in terms of accuracy over analysts' forecasts. 
C) support both types of forecasts equally. 
D) not support either type of forecast in terms of accuracy.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

What is the internal (sustainable)growth rate?How is it calculated?

Accepted Answer

The internal growth rate is th

Question 10

If a company's net income margin decreases,a company can maintain its ROA by increasing its asset turnover.

Accepted Answer

A) True 
 B)False

Question 11

What is meant by "quality of earnings," and how does it affect the equity analyst's job?

Accepted Answer

Quality of earnings generally has to do

Question 12

Which statement about the quality of reported EPS is false?

Accepted Answer

A) Earnings quality assessments are difficult to make and require considerable expertise in accounting and financial analysis. 
B) Reported EPS is not the precise figure that it first appears to be. 
C) It is necessary to make adjustments to reported EPS figures when
Making cross-sectional comparisons. 
D) Quality of earnings is generally consistent among companies in the same
Industry. 
A) Earnings quality assessments are difficult to make and require considerable expertise in accounting and financial analysis. 
B) Reported EPS is not the precise figure that it first appears to be. 
C) It is necessary to make adjustments to reported EPS figures when
Making cross-sectional comparisons. 
D) Quality of earnings is generally consistent among companies in the same
Industry.

Question 13

To estimate the intrinsic value of a company,investors could use the dividend discount model to estimate intrinsic value,or an earnings multiplier model based on a forecast of next year's EPS and what is thought to be an appropriate P/E ratio.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

Investors differ in their philosophies.I

Question 15

When an investor buys a share of common stock he/she buys a claim of ownership.How is this claim represented on the balance sheet?

Accepted Answer

The claim appears in the common equity s

Question 16

Which of the following would increase a firm's PEG ratio?

Accepted Answer

A) An increase in the firm's P/E 
B) A decrease in the firm's net profit margin 
C) An increase in the firm's growth 
D) A decrease in the firm's fixed capital investment 
A) An increase in the firm's P/E 
B) A decrease in the firm's net profit margin 
C) An increase in the firm's growth 
D) A decrease in the firm's fixed capital investment

Question 17

What are "earnings surprises?"How do they affect stock prices?

Accepted Answer

An earnings surprise occurs when a firm'

Question 18

It is necessary to determine a point estimate of the intrinsic value of a stock when using relative valuation techniques.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true?

Accepted Answer

A) Asset turnover is not related to ROA 
B) Leverage affects EPS 
C) ROA is a function of asset turnover and leverage 
D) EPS is solely a function of ROE 
A) Asset turnover is not related to ROA 
B) Leverage affects EPS 
C) ROA is a function of asset turnover and leverage 
D) EPS is solely a function of ROE

Question 20

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

Accepted Answer

A) Decision trees 
B) Program trading 
C) Day traders 
D) Neural networks 
A) Decision trees 
B) Program trading 
C) Day traders 
D) Neural networks

Exam 15: Company Analysis

A firm's sustainable growth rate can be calculated as the product of:

EPS are of higher quality if:

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

ROA is the product of:

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

The investment advisory service best known for evaluating mutual funds is:

Which of the following is true regarding earnings forecasts made by analysts versus forecasts made by statistical models? The evidence tends to:

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

What is the internal (sustainable)growth rate?How is it calculated?

If a company's net income margin decreases,a company can maintain its ROA by increasing its asset turnover.

What is meant by "quality of earnings," and how does it affect the equity analyst's job?

Which statement about the quality of reported EPS is false?

To estimate the intrinsic value of a company,investors could use the dividend discount model to estimate intrinsic value,or an earnings multiplier model based on a forecast of next year's EPS and what is thought to be an appropriate P/E ratio.

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

When an investor buys a share of common stock he/she buys a claim of ownership.How is this claim represented on the balance sheet?

Which of the following would increase a firm's PEG ratio?

What are "earnings surprises?"How do they affect stock prices?

It is necessary to determine a point estimate of the intrinsic value of a stock when using relative valuation techniques.

Which of the following statements is true?

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

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