Question 1

Which of the following is not one of the relative valuation multipliers used in fundamental analysis?

Accepted Answer

A) P/E ratio 
B) P/S ratio 
C) P/M ratio 
D) P/B ratio 
A) P/E ratio 
B) P/S ratio 
C) P/M ratio 
D) P/B ratio

Question 2

Which of the following approaches best indicates how EPS should be computed?Take after-tax net income and divide by:

Accepted Answer

A) current common shares outstanding. 
B) previous years common shares outstanding. 
C) treasury shares outstanding. 
D) average common shares outstanding. 
A) current common shares outstanding. 
B) previous years common shares outstanding. 
C) treasury shares outstanding. 
D) average common shares outstanding.

Question 3

Which of the following would be found in the "cash flows from investing activities" portion of a firm's statement of cash flows?

Accepted Answer

A) Changes in accounts receivable 
B) Depreciation 
C) Net borrowings 
D) Capital expenditures 
A) Changes in accounts receivable 
B) Depreciation 
C) Net borrowings 
D) Capital expenditures

Question 4

The cash flow statement consists of the following parts:

Accepted Answer

A) cash holdings from revenue,operations,investing,and financing activities. 
B) cash flows from revenue,operations,investing,and financing activities. 
C) cash holdings from operations,investing,and financing activities. 
D) cash flows from operations,investing,and financing activities. 
A) cash holdings from revenue,operations,investing,and financing activities. 
B) cash flows from revenue,operations,investing,and financing activities. 
C) cash holdings from operations,investing,and financing activities. 
D) cash flows from operations,investing,and financing activities.

Question 5

Which of the following represents an estimate of the rate at which a company can grow from internal sources?

Accepted Answer

A) Return on assets 
B) Sustainable growth rate 
C) Adjusted EPS 
D) Return on equity 
A) Return on assets 
B) Sustainable growth rate 
C) Adjusted EPS 
D) Return on equity

Question 6

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

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) increase or decrease depending on the level of interest rates. 
A) increase. 
B) stay the same. 
C) decrease. 
D) increase or decrease depending on the level of interest rates.

Question 7

The last step in top-down fundamental analysis is to:

Accepted Answer

A) analyze individual industries. 
B) analyze individual companies. 
C) analyze individual securities. 
D) perform technical analysis 
A) analyze individual industries. 
B) analyze individual companies. 
C) analyze individual securities. 
D) perform technical analysis

Question 8

Garner Inc.and Tanex Corp.are competitors in the equipment manufacturing industry.Garner has a P/S ratio of 3.2,whereas Tanex has a P/S ratio of 1.8.Which of the following best justifies the difference in P/S ratios between the two firms?Relative to Garner,Tanex has a:

Accepted Answer

A) higher total asset turnover. 
B) lower beta. 
C) lower net profit margin. 
D) lower total asset turnover. 
A) higher total asset turnover. 
B) lower beta. 
C) lower net profit margin. 
D) lower total asset turnover.

Question 9

The two components of EPS are:

Accepted Answer

A) ROA and leverage. 
B) book value per share and leverage. 
C) ROE and book value per share. 
D) leverage and profit margin. 
A) ROA and leverage. 
B) book value per share and leverage. 
C) ROE and book value per share. 
D) leverage and profit margin.

Question 10

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

Accepted Answer

A) beta. 
B) standard deviation. 
C) leverage. 
D) coefficient of variation. 
A) beta. 
B) standard deviation. 
C) leverage. 
D) coefficient of variation.

Question 11

The balance sheet shows a corporation's portfolio of assets and:

Accepted Answer

A) its liabilities,over an accounting period. 
B) its labilities,at a moment in time. 
C) its liabilities and owner's equity,over an accounting period. 
D) its liabilities and owner's equity,at a moment in time. 
A) its liabilities,over an accounting period. 
B) its labilities,at a moment in time. 
C) its liabilities and owner's equity,over an accounting period. 
D) its liabilities and owner's equity,at a moment in time.

Question 12

Fixed assets consist of:

Accepted Answer

A) cash and marketable securities. 
B) property,plant,and equipment. 
C) intangible assets,like goodwill. 
D) shareholders' equity. 
A) cash and marketable securities. 
B) property,plant,and equipment. 
C) intangible assets,like goodwill. 
D) shareholders' equity.

Question 13

The auditor's report:

Accepted Answer

A) guarantees accuracy of the financial statements. 
B) guarantees the quality of the earnings. 
C) attests that the statements are a fair presentation of financial position. 
D) includes a recommendation on the stock. 
A) guarantees accuracy of the financial statements. 
B) guarantees the quality of the earnings. 
C) attests that the statements are a fair presentation of financial position. 
D) includes a recommendation on the stock.

Question 14

How accurate are professional earnings estimates?Do purely mechanical models give better results than analysts who add subjective assessment to the data?

Accepted Answer

According to a study by Dreman and Berry

Question 15

In the model P/E=(D₁/E₁)/(k - g),the P/E should increase if the dividend payout ratio increases,other things the same.If the payout ratio was intentionally increased by the board of directors,other things are likely not to stay the same.What is likely to happen to the dividend growth rate and the required return?

Accepted Answer

If more earnings are paid out,then there

Question 16

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

Accepted Answer

A) Cash flows from operating activities 
B) Cash flows from investing activities 
C) Cash flows from financing activities 
D) Cash flows from trading activities 
A) Cash flows from operating activities 
B) Cash flows from investing activities 
C) Cash flows from financing activities 
D) Cash flows from trading activities

Question 17

On a company's balance sheet,shareholder's equity is measured in:

Accepted Answer

A) book value. 
B) market value. 
C) current value. 
D) non-depreciated value. 
A) book value. 
B) market value. 
C) current value. 
D) non-depreciated value.

Question 18

Which of the following mandated that firms,starting in 2004,must submit an annual report to the SEC outlining the effectiveness of their internal accounting controls?

Accepted Answer

A) SEC Amendments Act 
B) SIPC 
C) Glass-Stegall Act 
D) Sarbanes-Oxley Act 
A) SEC Amendments Act 
B) SIPC 
C) Glass-Stegall Act 
D) Sarbanes-Oxley Act

Question 19

International Financial Reporting Standards (IFRS)are now used by most countries.

Accepted Answer

A) True 
 B)False

Question 20

How would you explain P/E ratio differences among companies?By differences in investor:

Accepted Answer

A) expectations about the future growth of the market. 
B) estimates of the recent growth of earnings. 
C) expectations about the future growth of earnings. 
D) estimates about the recent growth of dividends. 
A) expectations about the future growth of the market. 
B) estimates of the recent growth of earnings. 
C) expectations about the future growth of earnings. 
D) estimates about the recent growth of dividends.

Exam 15: Company Analysis

Which of the following is not one of the relative valuation multipliers used in fundamental analysis?

Which of the following approaches best indicates how EPS should be computed?Take after-tax net income and divide by:

Which of the following would be found in the "cash flows from investing activities" portion of a firm's statement of cash flows?

The cash flow statement consists of the following parts:

Which of the following represents an estimate of the rate at which a company can grow from internal sources?

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

The last step in top-down fundamental analysis is to:

Garner Inc.and Tanex Corp.are competitors in the equipment manufacturing industry.Garner has a P/S ratio of 3.2,whereas Tanex has a P/S ratio of 1.8.Which of the following best justifies the difference in P/S ratios between the two firms?Relative to Garner,Tanex has a:

The two components of EPS are:

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

The balance sheet shows a corporation's portfolio of assets and:

Fixed assets consist of:

The auditor's report:

How accurate are professional earnings estimates?Do purely mechanical models give better results than analysts who add subjective assessment to the data?

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

On a company's balance sheet,shareholder's equity is measured in:

Which of the following mandated that firms,starting in 2004,must submit an annual report to the SEC outlining the effectiveness of their internal accounting controls?

International Financial Reporting Standards (IFRS)are now used by most countries.

How would you explain P/E ratio differences among companies?By differences in investor:

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Theory

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

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