Question 1

A pessimistic forecast from an analyst may damage the relationships of the analyst with both the managers of the analyzed firm and the analyst's employer.

Accepted Answer

A) True 
 B)False  True

Question 2

Given the following list of patterns of expenditure timing,indicate the correct ordering of their resulting internal rates of return (IRRs )from lowest to highest.
I.Typical spending pattern.
II.Spending evenly over cycle.
III.Optimally timed asset purchases.
IV.Optimally timed capital spending.

Accepted Answer

A) I,II,III,IV. 
B) II,I,IV,III. 
C) II,I,III,IV. 
D) I,II,IV,III. 
A) I,II,III,IV. 
B) II,I,IV,III. 
C) II,I,III,IV. 
D) I,II,IV,III. D

Question 3

According to the empirical evidence,which of the following is most accurate concerning the relative importance of demand and supply in determining cyclical profitability?

Accepted Answer

A) Fluctuations in customer demand and producer supply are not important. 
B) Fluctuations in customer demand are more important than fluctuations in producer supply. 
C) Fluctuations in producer supply are more important than fluctuations in customer demand. 
D) Fluctuations in customer demand and producer supply are equally important. 
A) Fluctuations in customer demand and producer supply are not important. 
B) Fluctuations in customer demand are more important than fluctuations in producer supply. 
C) Fluctuations in producer supply are more important than fluctuations in customer demand. 
D) Fluctuations in customer demand and producer supply are equally important. C

Question 4

According to simulations of the prices of cyclical stocks,which of the following seems to best characterize how analysts appear to make forecasts?

Accepted Answer

A) Analysts make naive,random-walk forecasts,which are not very accurate. 
B) Analysts naively make forecasts based on the extrapolation of recent trends. 
C) Analysts make forecasts based on the assumptions that historical cycles will repeat as they have in the past. 
D) Analysts make forecasts based on a 50/50 chance the firm will exhibit past cyclicality or break into a new trend. 
A) Analysts make naive,random-walk forecasts,which are not very accurate. 
B) Analysts naively make forecasts based on the extrapolation of recent trends. 
C) Analysts make forecasts based on the assumptions that historical cycles will repeat as they have in the past. 
D) Analysts make forecasts based on a 50/50 chance the firm will exhibit past cyclicality or break into a new trend.

Question 5

Which of the following is most accurate concerning predicting cycles and inflection points?

Accepted Answer

A) It is easy to predict both cycles and their inflection points. 
B) It is easy to predict cycles,but it is difficult to predict inflection points. 
C) It is difficult to predict cycles and more difficult to predict their inflection points. 
D) It is hard to predict cycles,but once in a cycle,the inflection points are easy to predict. 
A) It is easy to predict both cycles and their inflection points. 
B) It is easy to predict cycles,but it is difficult to predict inflection points. 
C) It is difficult to predict cycles and more difficult to predict their inflection points. 
D) It is hard to predict cycles,but once in a cycle,the inflection points are easy to predict.

Question 6

The discounted cash flow (DCF )valuations of companies with cyclical earnings tend to be more volatile than those of less cyclical companies.But their share prices are much more stable.

Accepted Answer

A) True 
 B)False

Question 7

A cyclical company is one whose earnings demonstrate a repeating pattern of significant increases and decreases,and the historical performance must be assessed in the context of the cycle.

Accepted Answer

A) True 
 B)False

Question 8

The four-step approach for valuing cyclical companies requires a minimum of two scenarios.If an analyst is using only two scenarios,how should they be constructed?

Accepted Answer

One scenario is the normal cycle scenari

Question 9

Which of the following are true concerning the properties of consensus earnings forecasts for cyclical companies?
I.They account for the cyclical nature of the firm.
II.Discounted cash flow (DCF )models are usually consistent with the facts.
III.The forecasts usually show an upward-sloping trend.
IV.The earnings and cash flow projections of the market are consistent with company performance.

Accepted Answer

A) I and II only. 
B) I and III only. 
C) II and III only. 
D) II and IV only. 
A) I and II only. 
B) I and III only. 
C) II and III only. 
D) II and IV only.

Exam 33: Cyclical Companies

A pessimistic forecast from an analyst may damage the relationships of the analyst with both the managers of the analyzed firm and the analyst's employer.

Given the following list of patterns of expenditure timing,indicate the correct ordering of their resulting internal rates of return (IRRs )from lowest to highest. I.Typical spending pattern. II.Spending evenly over cycle. III.Optimally timed asset purchases. IV.Optimally timed capital spending.

According to the empirical evidence,which of the following is most accurate concerning the relative importance of demand and supply in determining cyclical profitability?

According to simulations of the prices of cyclical stocks,which of the following seems to best characterize how analysts appear to make forecasts?

Which of the following is most accurate concerning predicting cycles and inflection points?

The discounted cash flow (DCF )valuations of companies with cyclical earnings tend to be more volatile than those of less cyclical companies.But their share prices are much more stable.

A cyclical company is one whose earnings demonstrate a repeating pattern of significant increases and decreases,and the historical performance must be assessed in the context of the cycle.

The four-step approach for valuing cyclical companies requires a minimum of two scenarios.If an analyst is using only two scenarios,how should they be constructed?

Why Value Value

Fundamental Principles of Value Creation

Conservation of Value and the Role of Risk

The Alchemy of Stock Market Performance

The Stock Market Is Smarter Than You Think

Return on Invested Capital

Growth

Frameworks for Valuation

Reorganizing the Financial Statements

Analyzing Performance

Forecasting Performance

Estimating Continuing Value

Estimating the Cost of Capital

Moving From Enterprise Value to Value Per Share

Analyzing the Results

Using Multiples

Valuation by Parts

Taxes

Non-operating Items, Provisions, and Reserves

Leases and Retirement Obligations

Alternative Ways to Measure Return on Capital

Inflation

Cross-Border Valuation

Case Study: Heineken

Corporate Portfolio Strategy

Performance Management

Mergers and Acquisitions

Divestitures

Capital Structure, Dividends, and Share Repurchases

Investor Communications

Emerging Markets

Valuing High-Growth Companies

Banks

Flexibility

Filters