Exam 8: Economic and Industry Analysis

The micro approach to estimating the industry multiple would entail examining specific variables such as: return on equity, earnings growth, and profit margin trend.

Which of the following is not considered a basic competitive force?

Assuming the Canadian dollar is strong relative to the German DM, it will be easier for the Canadian paper industry to export to Germany.

Toward the end of a recession,

When forecasting industry sales it can be useful to

Global industry analysis must evaluate the effects not only of world supply, demand and cost components for an industry, but also different valuation levels due to accounting conventions and the impact of exchange rates.

When the government introduces a licensing requirement for an industry, it reduces the barriers to entry for the industry.

Exhibit 8-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Assume that you are an analyst for the Canadian auto parts industry. Consider the following information that you propose to use to obtain an estimate of year 2010 EPS for the Canadian auto parts industry Year 2009 Estimated Year 2010 Personal consumption expenditures \ 6,800 billion Personal consumption expenditures growth 1.5\% Industry Sales per share \ 525 Industry Operating profit margin 15\% Industry Depreciation/Fixed Assets 8.25\% Industry Fixed asset turnover 3 Interest rate 6\% Industry Total asset turnover 1.2 Industry Debt/Total assets 45\% Industry Tax rate 36\% In addition a regression analysis indicates the following relationship between growth in industry sales per share and personal consumption expenditures (PCE) growth is %D Sales per share = 0.02 + 1.5(%D PCE) -Refer to Exhibit 8-1. Calculate the per share interest rate charge for the year 2010.

At what stage in the industrial life cycle is there an influx of competition?

Which of the following statements regarding cyclical industries is true?

Which of the following is not a competitive force suggested by Porter?

"Downsizing" of corporate America in the 1990s is an example of structural change.

In the rapid accelerating growth stage, profit margins are typically very high.

The fact that all firms in an industry do not move together negates the value of industry analysis.

Which of the following is not characteristic of the "decline" phase of the industry life cycle?

Studies of industries indicate that their past performance can be useful in predicting future performance.

Complete consistency over time for different industries would indicate that industry analysis is not necessary after market analysis.

When considering inputs, you would evaluate an industry's prospects based on those of its raw material suppliers, labour force, etc.

A number of factors affect the cash flow and risk prospects of different industries. Which of the following is not such a factor?

The industry life cycle can be rejuvenated at any stage by product innovations that attract new customers or convince existing customers to buy the new product.