Question 1

When analyzing the structure of an industry, which of the following factors is particular to the company only?

Accepted Answer

A) Government regulations 
B) Barriers to entry 
C) Product quality 
D) All of the above affect industry structure 
A) Government regulations 
B) Barriers to entry 
C) Product quality 
D) All of the above affect industry structure

Question 2

Determining the crossover point on the life cycle curve is important for which reason?

Accepted Answer

A) Stock prices usually climb as earnings become more stable 
B) Price-earnings ratios collapse because of slower growth expectations 
C) Increasing cash dividends will lead to higher share prices 
D) Investors who choose to invest in growth companies will want to wait until the crossover point has been reached 
E) None of the above 
A) Stock prices usually climb as earnings become more stable 
B) Price-earnings ratios collapse because of slower growth expectations 
C) Increasing cash dividends will lead to higher share prices 
D) Investors who choose to invest in growth companies will want to wait until the crossover point has been reached 
E) None of the above

Question 3

Patents are important to the pharmaceutical industry because they:

Accepted Answer

A) protect companies from low-cost generic drugs. 
B) keep other drug companies from developing competitive drugs for the same disease. 
C) allow the companies to earn a high enough rate of return in the early years of a drug to continue research and development efforts on new drugs. 
D) A and C 
A) protect companies from low-cost generic drugs. 
B) keep other drug companies from developing competitive drugs for the same disease. 
C) allow the companies to earn a high enough rate of return in the early years of a drug to continue research and development efforts on new drugs. 
D) A and C

Question 4

Growth firms generally pay higher cash dividends than mature firms.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following stages does not belong in the industry life cycle?

Accepted Answer

A) Growth 
B) Stagnation 
C) Decline 
D) Maturity 
E) Expansion 
A) Growth 
B) Stagnation 
C) Decline 
D) Maturity 
E) Expansion

Question 6

Why do industries usually enter the decline stage?

Accepted Answer

A) Product innovation has not increased the product base over the years 
B) Low dividend payout ratios have kept spending in research and development down 
C) Economic recessions have lowered sales 
D) Competition from foreign producers has limited profits 
A) Product innovation has not increased the product base over the years 
B) Low dividend payout ratios have kept spending in research and development down 
C) Economic recessions have lowered sales 
D) Competition from foreign producers has limited profits

Question 7

Which of the following factors would not affect an industry's life cycle?

Accepted Answer

A) Economic growth 
B) Availability of resources 
C) Competition 
D) Expansion into global markets 
A) Economic growth 
B) Availability of resources 
C) Competition 
D) Expansion into global markets

Question 8

Which of the following competitive forces is not one of the five mentioned in this chapter?

Accepted Answer

A) Threat of market entry by new competitors 
B) Threat of substitute goods 
C) Bargaining power of customers 
D) Intensity of rivalry among competitors 
A) Threat of market entry by new competitors 
B) Threat of substitute goods 
C) Bargaining power of customers 
D) Intensity of rivalry among competitors

Question 9

A technically innovative firm in a mature industry may provide better growth opportunities than a high-growth industry.

Accepted Answer

A) True 
 B)False

Question 10

Which investing approach do stock pickers favor?

Accepted Answer

A) Top-down approach 
B) Bottom-up approach 
C) Industry analysis 
D) Rotational investing 
A) Top-down approach 
B) Bottom-up approach 
C) Industry analysis 
D) Rotational investing

Question 11

The lack of barriers to entry tends to help established firms by giving them power to increase prices and profits.

Accepted Answer

A) True 
 B)False

Question 12

Mature industries are not likely to be sensitive to short-term swings in the business cycle.

Accepted Answer

A) True 
 B)False

Question 13

The growth rate of the companies that make up the S&P 500 is an excellent proxy for the growth of mature companies.

Accepted Answer

A) True 
 B)False

Question 14

Different industries react similarly to changes in the business cycle.

Accepted Answer

A) True 
 B)False

Question 15

Most industries are similarly affected by the cyclical swings in the economy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the four following industries was not mentioned as an example of a consumer non-cyclical industry?

Accepted Answer

A) Utility companies 
B) Food stocks 
C) Pharmaceuticals 
D) Tobacco stocks 
A) Utility companies 
B) Food stocks 
C) Pharmaceuticals 
D) Tobacco stocks

Question 17

Oligopolistic industries are characterized by many competitors and few barriers to entry.

Accepted Answer

A) True 
 B)False

Question 18

If an industry is in the mature phase, this means that all companies in that industry will also be in the mature phase.

Accepted Answer

A) True 
 B)False

Exam 6: Industry Analysis

When analyzing the structure of an industry, which of the following factors is particular to the company only?

Determining the crossover point on the life cycle curve is important for which reason?

Patents are important to the pharmaceutical industry because they:

Growth firms generally pay higher cash dividends than mature firms.

Which of the following stages does not belong in the industry life cycle?

Why do industries usually enter the decline stage?

Which of the following factors would not affect an industry's life cycle?

Which of the following competitive forces is not one of the five mentioned in this chapter?

A technically innovative firm in a mature industry may provide better growth opportunities than a high-growth industry.

Which investing approach do stock pickers favor?

The lack of barriers to entry tends to help established firms by giving them power to increase prices and profits.

Mature industries are not likely to be sensitive to short-term swings in the business cycle.

The growth rate of the companies that make up the S&P 500 is an excellent proxy for the growth of mature companies.

Different industries react similarly to changes in the business cycle.

Most industries are similarly affected by the cyclical swings in the economy.

Which of the four following industries was not mentioned as an example of a consumer non-cyclical industry?

Oligopolistic industries are characterized by many competitors and few barriers to entry.

If an industry is in the mature phase, this means that all companies in that industry will also be in the mature phase.

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