Question 1

Investors who follow the bottom-up approach to stock valuation are referred to as industry-analysts.

Accepted Answer

A) True 
 B)False

Question 2

The life cycle curve in Chapter 6 is graphed so that the steeper the slope of the line, the faster the growth rate of the industry.

Accepted Answer

A) True 
 B)False

Question 3

Firms are most able to raise prices on products for which many substitute goods exist.

Accepted Answer

A) True 
 B)False

Question 4

The pharmaceutical industry is dominated by international companies.

Accepted Answer

A) True 
 B)False

Question 5

Stock prices plummet as industries move across the crossover point, because price-earnings ratios collapse as analysts lower growth expectations.

Accepted Answer

A) True 
 B)False

Question 6

When monopolies exist, they are almost always found in mature industries.

Accepted Answer

A) True 
 B)False

Question 7

The relative importance of each of the five basic competitive forces is the same for almost every industry.

Accepted Answer

A) True 
 B)False

Question 8

Ascertaining the competitive structure of an industry can help the analyst to determine the long-term profitability and outlook for that industry.

Accepted Answer

A) True 
 B)False

Question 9

An industry reaches the maturity stage when its sales growth matches the rate of growth of the economy.

Accepted Answer

A) True 
 B)False

Question 10

The pharmaceutical industry has submitted almost 2,000 drugs per year to the U.S. Food and Drug Administration between 1995 and 2005, and the approval rate is close to:

Accepted Answer

A) 3.3%. 
B) 8.2%. 
C) 10%. 
D) 22.2%. 
A) 3.3%. 
B) 8.2%. 
C) 10%. 
D) 22.2%.

Question 11

In the final stages of the business cycle, rotational investors will purchase basic materials and energy stocks.

Accepted Answer

A) True 
 B)False

Question 12

Firms in the development stage are typically publicly owned.

Accepted Answer

A) True 
 B)False

Question 13

Intense rivalry between competitors has a different impact on the competitors than a new entrant in the market.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is false?

Accepted Answer

A) Industry life cycles measure the growth path of an industry through 5 stages 
B) Industry life cycles predict an industry's sensitivity to the economy 
C) The industry life cycle curve is graphed so that, the steeper the slope of the line, the faster the growth rate of the industry 
D) The particular phase of the life cycle of an industry determines the growth of earnings, dividends, capital expenditures, and market demand for products 
E) The five stages of the industry life cycle are development, growth, expansion, maturity, and decline 
A) Industry life cycles measure the growth path of an industry through 5 stages 
B) Industry life cycles predict an industry's sensitivity to the economy 
C) The industry life cycle curve is graphed so that, the steeper the slope of the line, the faster the growth rate of the industry 
D) The particular phase of the life cycle of an industry determines the growth of earnings, dividends, capital expenditures, and market demand for products 
E) The five stages of the industry life cycle are development, growth, expansion, maturity, and decline

Question 15

Pure competition in manufacturing is common in the United States.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following economic structures of industries was not specifically mentioned in this chapter?

Accepted Answer

A) Monopoly 
B) Pure competition 
C) Semi-strong competition 
D) Oligopolies 
A) Monopoly 
B) Pure competition 
C) Semi-strong competition 
D) Oligopolies

Question 17

Stock dividends are used to signal to investors that a company is making profit.

Accepted Answer

A) True 
 B)False

Question 18

Stock prices increase as companies reach the crossover point, since the company's earnings are now more predictable.

Accepted Answer

A) True 
 B)False

Question 19

Porter's five competitive forces vary from industry to industry, and directly affect the return on assets and return on equity.

Accepted Answer

A) True 
 B)False

Question 20

The more saturated an industry gets with competitors, the further along the life cycle it will probably be.

Accepted Answer

A) True 
 B)False

Exam 6: Industry Analysis

Investors who follow the bottom-up approach to stock valuation are referred to as industry-analysts.

The life cycle curve in Chapter 6 is graphed so that the steeper the slope of the line, the faster the growth rate of the industry.

Firms are most able to raise prices on products for which many substitute goods exist.

The pharmaceutical industry is dominated by international companies.

Stock prices plummet as industries move across the crossover point, because price-earnings ratios collapse as analysts lower growth expectations.

When monopolies exist, they are almost always found in mature industries.

The relative importance of each of the five basic competitive forces is the same for almost every industry.

Ascertaining the competitive structure of an industry can help the analyst to determine the long-term profitability and outlook for that industry.

An industry reaches the maturity stage when its sales growth matches the rate of growth of the economy.

The pharmaceutical industry has submitted almost 2,000 drugs per year to the U.S. Food and Drug Administration between 1995 and 2005, and the approval rate is close to:

In the final stages of the business cycle, rotational investors will purchase basic materials and energy stocks.

Firms in the development stage are typically publicly owned.

Intense rivalry between competitors has a different impact on the competitors than a new entrant in the market.

Which of the following statements is false?

Pure competition in manufacturing is common in the United States.

Which of the following economic structures of industries was not specifically mentioned in this chapter?

Stock dividends are used to signal to investors that a company is making profit.

Stock prices increase as companies reach the crossover point, since the company's earnings are now more predictable.

Porter's five competitive forces vary from industry to industry, and directly affect the return on assets and return on equity.

The more saturated an industry gets with competitors, the further along the life cycle it will probably be.

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

Filters