Question 1

Which of the following characteristics is not usually found in industries that are oligopolies?

Accepted Answer

A) Barriers to entry 
B) Intense competition between competitors 
C) Increasing foreign competition 
D) No differentiation between products 
A) Barriers to entry 
B) Intense competition between competitors 
C) Increasing foreign competition 
D) No differentiation between products

Question 2

The first step in the top-down approach to stock valuation is analyzing the position of the industry in its life cycle.

Accepted Answer

A) True 
 B)False

Question 3

Industries in the maturity stage will have growth rates comparable to which of the following?

Accepted Answer

A) Equal to the long-term trend in the gross domestic product (GDP) 
B) Double the long-term trend in GDP 
C) Less than the long-term trend in GDP 
D) The growth rate of the consumer price index (CPI) 
A) Equal to the long-term trend in the gross domestic product (GDP) 
B) Double the long-term trend in GDP 
C) Less than the long-term trend in GDP 
D) The growth rate of the consumer price index (CPI)

Question 4

Due to intense needs for capital to fund growth, Stage I companies rarely pay cash dividends.

Accepted Answer

A) True 
 B)False

Question 5

It is almost always unwise to invest in an industry which is entering Stage III of the industry life cycle.

Accepted Answer

A) True 
 B)False

Question 6

Companies in mature industries still have a dramatic need for internal cash flows to finance future growth.

Accepted Answer

A) True 
 B)False

Question 7

The method of starting the stock valuation process with an analysis of the economy is referred to as the bottom-up approach.

Accepted Answer

A) True 
 B)False

Question 8

It is always a safe bet to invest in companies in growing industries.

Accepted Answer

A) True 
 B)False

Question 9

Industry life cycles predict an industry's sensitivity to the economy.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following four industry sectors would benefit the most from rising inflation?

Accepted Answer

A) Consumer cyclical goods 
B) Basic materials 
C) Household durable goods 
D) Consumer non-cyclical goods 
A) Consumer cyclical goods 
B) Basic materials 
C) Household durable goods 
D) Consumer non-cyclical goods

Question 11

An investor will purchase shares of companies in the development stage for:

Accepted Answer

A) current income only. 
B) current income and capital gains. 
C) capital gains only. 
D) passive losses to offset other income. 
A) current income only. 
B) current income and capital gains. 
C) capital gains only. 
D) passive losses to offset other income.

Question 12

Which of the following industry sectors would an investor want to purchase at the trough of the business cycle?

Accepted Answer

A) Basic materials 
B) Consumer non-cyclical goods 
C) Consumer cyclical goods 
D) Household durable goods 
A) Basic materials 
B) Consumer non-cyclical goods 
C) Consumer cyclical goods 
D) Household durable goods

Question 13

Michael Porter divides competitive structure into five basic competitive forces. Which one of the following does not belong?

Accepted Answer

A) Threat of entry by new competitors 
B) Bargaining power of the buyers 
C) Bargaining power of the sellers 
D) The relative profit margins between competitors 
E) Rivalry among existing competitors 
A) Threat of entry by new competitors 
B) Bargaining power of the buyers 
C) Bargaining power of the sellers 
D) The relative profit margins between competitors 
E) Rivalry among existing competitors

Question 14

Competitive strategies of individual firms have an immediate impact on the structure of the industry.

Accepted Answer

A) True 
 B)False

Question 15

Industry life cycles measure the growth path of an industry through five stages.

Accepted Answer

A) True 
 B)False

Question 16

Competitive strategies of individual firms do not have an impact on the outlook for the industry as a whole.

Accepted Answer

A) True 
 B)False

Question 17

Rotational investing is defined as the process by which investors rotate out of losing stocks and into new stocks.

Accepted Answer

A) True 
 B)False

Question 18

When analyzing an industry, individual companies seem to stand out for their superior performance.

Accepted Answer

A) True 
 B)False

Question 19

The last step to the top-down approach is to analyze the overall health of the economy.

Accepted Answer

A) True 
 B)False

Question 20

The crossover point on the life cycle curve is the point where companies sell stock in an initial public offering (IPO).

Accepted Answer

A) True 
 B)False

Exam 6: Industry Analysis

Which of the following characteristics is not usually found in industries that are oligopolies?

The first step in the top-down approach to stock valuation is analyzing the position of the industry in its life cycle.

Industries in the maturity stage will have growth rates comparable to which of the following?

Due to intense needs for capital to fund growth, Stage I companies rarely pay cash dividends.

It is almost always unwise to invest in an industry which is entering Stage III of the industry life cycle.

Companies in mature industries still have a dramatic need for internal cash flows to finance future growth.

The method of starting the stock valuation process with an analysis of the economy is referred to as the bottom-up approach.

It is always a safe bet to invest in companies in growing industries.

Industry life cycles predict an industry's sensitivity to the economy.

Which of the following four industry sectors would benefit the most from rising inflation?

An investor will purchase shares of companies in the development stage for:

Which of the following industry sectors would an investor want to purchase at the trough of the business cycle?

Michael Porter divides competitive structure into five basic competitive forces. Which one of the following does not belong?

Competitive strategies of individual firms have an immediate impact on the structure of the industry.

Industry life cycles measure the growth path of an industry through five stages.

Competitive strategies of individual firms do not have an impact on the outlook for the industry as a whole.

Rotational investing is defined as the process by which investors rotate out of losing stocks and into new stocks.

When analyzing an industry, individual companies seem to stand out for their superior performance.

The last step to the top-down approach is to analyze the overall health of the economy.

The crossover point on the life cycle curve is the point where companies sell stock in an initial public offering (IPO).

The Investment Setting

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Valuation of the Individual Firm

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Bond and Fixed-Income Fundamentals

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

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