Question 1

Which of the following are not typically considered a threat of new entrants to an industry?

Accepted Answer

A)  Low current prices relative to costs 
B)  Large capital requirements 
C)  Extensive distribution channels with exclusive distribution contracts 
D)  Government policy restricting access to raw materials 
E)  Large volume purchases relative to the sales of a supplier 
A)  Low current prices relative to costs 
B)  Large capital requirements 
C)  Extensive distribution channels with exclusive distribution contracts 
D)  Government policy restricting access to raw materials 
E)  Large volume purchases relative to the sales of a supplier

Question 2

Structural changes occur when the economy undergoes a major organizational change or how it functions.

Accepted Answer

A) True 
 B)False

Question 3

The earnings multiplier approach would be useful to predict the performance of the stock market.

Accepted Answer

A) True 
 B)False

Question 4

Country risk is the uncertainty of earnings due to changes in exchange rates faced by firms in this industry that sell outside the United States.

Accepted Answer

A) True 
 B)False

Question 5

During which stage of the industrial life cycle is the product or service recognized as viable and the demand substantial?

Accepted Answer

A)  Early pioneering development 
B)  Rapid accelerating growth 
C)  Acquisition and consolidation 
D)  Mature growth 
E)  Stabilization and market maturity 
A)  Early pioneering development 
B)  Rapid accelerating growth 
C)  Acquisition and consolidation 
D)  Mature growth 
E)  Stabilization and market maturity

Question 6

What might cause an industry's sales to decline?

Accepted Answer

A)  Changes in consumer tastes 
B)  Product obsolescence 
C)  Growth of substitute products 
D)  Sluggish economic growth 
E)  All of the above. 
A)  Changes in consumer tastes 
B)  Product obsolescence 
C)  Growth of substitute products 
D)  Sluggish economic growth 
E)  All of the above.

Question 7

While there is substantial dispersion in industry risk over periods of time, there is consistency in the industry risk during a period of time.

Accepted Answer

A) True 
 B)False

Question 8

What have studies found when analyzing risk levels among industries?

Accepted Answer

A)  risk levels vary among different industries. 
B)  risk levels remained fairly constant across industries. 
C)  risk levels for the same industry varied over time. 
D)  risk levels for the same industry remain fairly constant over time. 
E)  Choices a and d 
A)  risk levels vary among different industries. 
B)  risk levels remained fairly constant across industries. 
C)  risk levels for the same industry varied over time. 
D)  risk levels for the same industry remain fairly constant over time. 
E)  Choices a and d

Question 9

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 $\begin{array}{lcc}
& \text { Year 2009 } & \text {  Estimated Year 2010} \
\hline \text { Personal consumption expenditures } & \$ 6,800 \text {billion  }   \
\text {Personal consumption expenditures growth   } &&1.5 \%\
\text {Industry Sales per share  } &\$ 525\
\text { Industry Operating profit margin } &&15 \% \
\text {Industry Depreciation/Fixed Assets  } &&8.25 \% \
\text { Industry Fixed asset turnover } &&3 \
\text {Interest rate  } &&6 \% \
\text {Industry Total asset turnover  } &&1.2 \
\text {Industry Debt/Total assets  } &&45 \% \
\text {  Industry Tax rate} &&36 \%
\end{array}$ 
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 industry year 2010 EBITDA per share.

Accepted Answer

A)  $95.05 
B)  $89.15 
C)  $92.56 
D)  $94.73 
E)  $86.23 
A)  $95.05 
B)  $89.15 
C)  $92.56 
D)  $94.73 
E)  $86.23

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The capital goods industry typically outperforms other sectors during a recession.

Accepted Answer

A) True 
 B)False

Question 12

During a recession,

Accepted Answer

A)  financial stock rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  capital goods stocks rise on expectation of increases in business capital spending. 
D)  basic materials stocks rise on expectation of rising profit margins. 
E)  consumer staple stocks rise on expectations that consumers will continue to spend on necessities. 
A)  financial stock rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  capital goods stocks rise on expectation of increases in business capital spending. 
D)  basic materials stocks rise on expectation of rising profit margins. 
E)  consumer staple stocks rise on expectations that consumers will continue to spend on necessities.

Question 13

The relationship between an economic series such as disposable personal income and industry sales is usually stronger in an industry that is more specialized.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  Consumer will accept uneven quality 
B)  Products have technical and performance differentiation 
C)  High advertising costs 
D)  Low profits 
E)  Many competitors 
A)  Consumer will accept uneven quality 
B)  Products have technical and performance differentiation 
C)  High advertising costs 
D)  Low profits 
E)  Many competitors

Question 15

Which of the following is not a stage in the industrial life cycle?

Accepted Answer

A)  Early pioneering development 
B)  Rapid accelerating growth 
C)  Acquisition and consolidation 
D)  Mature growth 
E)  Stabilization and market maturity 
A)  Early pioneering development 
B)  Rapid accelerating growth 
C)  Acquisition and consolidation 
D)  Mature growth 
E)  Stabilization and market maturity

Question 16

Cyclical industries are attractive investments during the early stages of an economic recovery.

Accepted Answer

A) True 
 B)False

Question 17

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 $\begin{array}{lcc}
& \text { Year 2009 } & \text {  Estimated Year 2010} \
\hline \text { Personal consumption expenditures } & \$ 6,800 \text {billion  }   \
\text {Personal consumption expenditures growth   } &&1.5 \%\
\text {Industry Sales per share  } &\$ 525\
\text { Industry Operating profit margin } &&15 \% \
\text {Industry Depreciation/Fixed Assets  } &&8.25 \% \
\text { Industry Fixed asset turnover } &&3 \
\text {Interest rate  } &&6 \% \
\text {Industry Total asset turnover  } &&1.2 \
\text {Industry Debt/Total assets  } &&45 \% \
\text {  Industry Tax rate} &&36 \%
\end{array}$ 
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. Estimate the industry sales per share for the year 2010.

Accepted Answer

A)  $574.9 
B)  $600.0 
C)  $585.03 
D)  $625 
E)  $550 
A)  $574.9 
B)  $600.0 
C)  $585.03 
D)  $625 
E)  $550

Question 18

During which industry life cycle stage do firms experience low rates of return on capital and investors begin to seek alternative uses of capital?

Accepted Answer

A)  Pioneering and development 
B)  Mature growth 
C)  Stabilization and market maturity 
D)  Deceleration of growth and decline 
E)  Disassembly and restructure 
A)  Pioneering and development 
B)  Mature growth 
C)  Stabilization and market maturity 
D)  Deceleration of growth and decline 
E)  Disassembly and restructure

Question 19

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 $\begin{array}{lcc}
& \text { Year 2009 } & \text {  Estimated Year 2010} \
\hline \text { Personal consumption expenditures } & \$ 6,800 \text {billion  }   \
\text {Personal consumption expenditures growth   } &&1.5 \%\
\text {Industry Sales per share  } &\$ 525\
\text { Industry Operating profit margin } &&15 \% \
\text {Industry Depreciation/Fixed Assets  } &&8.25 \% \
\text { Industry Fixed asset turnover } &&3 \
\text {Interest rate  } &&6 \% \
\text {Industry Total asset turnover  } &&1.2 \
\text {Industry Debt/Total assets  } &&45 \% \
\text {  Industry Tax rate} &&36 \%
\end{array}$ 
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 industry EBT per share for the year 2010.

Accepted Answer

A)  $53.29 
B)  $67.89 
C)  $68.75 
D)  $59.63 
E)  $57.49 
A)  $53.29 
B)  $67.89 
C)  $68.75 
D)  $59.63 
E)  $57.49

Question 20

Toward the business cycle peak

Accepted Answer

A)  financial stock rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  capital goods stocks rise on expectation of increases in business capital spending. 
D)  basic materials stocks rise on expectation of rising profit margins. 
E)  consumer staple stocks rise on expectations that consumers will continue to spend on necessities. 
A)  financial stock rise on expectations of increases in loan demand, housing constructions and security offerings. 
B)  consumer durable stocks rise on expectations of rising consumer confidence and personal income. 
C)  capital goods stocks rise on expectation of increases in business capital spending. 
D)  basic materials stocks rise on expectation of rising profit margins. 
E)  consumer staple stocks rise on expectations that consumers will continue to spend on necessities.

Which of the following are not typically considered a threat of new entrants to an industry?

Structural changes occur when the economy undergoes a major organizational change or how it functions.

The earnings multiplier approach would be useful to predict the performance of the stock market.

Country risk is the uncertainty of earnings due to changes in exchange rates faced by firms in this industry that sell outside the United States.

During which stage of the industrial life cycle is the product or service recognized as viable and the demand substantial?

What might cause an industry's sales to decline?

While there is substantial dispersion in industry risk over periods of time, there is consistency in the industry risk during a period of time.

What have studies found when analyzing risk levels among industries?

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

The capital goods industry typically outperforms other sectors during a recession.

During a recession,

The relationship between an economic series such as disposable personal income and industry sales is usually stronger in an industry that is more specialized.

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

Which of the following is not a stage in the industrial life cycle?

Cyclical industries are attractive investments during the early stages of an economic recovery.

During which industry life cycle stage do firms experience low rates of return on capital and investors begin to seek alternative uses of capital?

Toward the business cycle peak

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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Exam 8: Economic and Industry Analysis

Which of the following are not typically considered a threat of new entrants to an industry?

Structural changes occur when the economy undergoes a major organizational change or how it functions.

The earnings multiplier approach would be useful to predict the performance of the stock market.

Country risk is the uncertainty of earnings due to changes in exchange rates faced by firms in this industry that sell outside the United States.

During which stage of the industrial life cycle is the product or service recognized as viable and the demand substantial?

What might cause an industry's sales to decline?

While there is substantial dispersion in industry risk over periods of time, there is consistency in the industry risk during a period of time.

What have studies found when analyzing risk levels among industries?

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

The capital goods industry typically outperforms other sectors during a recession.

During a recession,

The relationship between an economic series such as disposable personal income and industry sales is usually stronger in an industry that is more specialized.

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

Which of the following is not a stage in the industrial life cycle?

Cyclical industries are attractive investments during the early stages of an economic recovery.

During which industry life cycle stage do firms experience low rates of return on capital and investors begin to seek alternative uses of capital?

Toward the business cycle peak

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

Filters