Question 1

Because all firms in an industry do not move together there is little value in industry analysis.

Accepted Answer

A) True 
 B)False

Question 2

Structural changes do have a cyclical pattern.

Accepted Answer

A) True 
 B)False

Question 3

The ____ of an industry is a function of retention rate and return on equity.

Accepted Answer

A)  Expected return 
B)  Expected business risk 
C)  Expected financial risk 
D)  Expected growth rate 
E)  Expected sales volatility 
A)  Expected return 
B)  Expected business risk 
C)  Expected financial risk 
D)  Expected growth rate 
E)  Expected sales volatility

Question 4

What should analysts identify and monitor?

Accepted Answer

A)  The current and emerging trends and patterns affecting an industry. 
B)  The indicators of trends and patterns in structural factors. 
C)  The momentum toward change in trends and patterns in structural factors. 
D)  All of the above. 
E)  Choices a and b. 
A)  The current and emerging trends and patterns affecting an industry. 
B)  The indicators of trends and patterns in structural factors. 
C)  The momentum toward change in trends and patterns in structural factors. 
D)  All of the above. 
E)  Choices a and b.

Question 5

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 industry Total Assets per share for the year 2010.

Accepted Answer

A)  $450 
B)  $565.67 
C)  $513.58 
D)  $479.07 
E)  $385.77 
A)  $450 
B)  $565.67 
C)  $513.58 
D)  $479.07 
E)  $385.77

Question 6

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 industry level of debt for the year 2010.

Accepted Answer

A)  $215.58 
B)  $300.75 
C)  $237.67 
D)  $285.98 
E)  $193.72 
A)  $215.58 
B)  $300.75 
C)  $237.67 
D)  $285.98 
E)  $193.72

Question 7

Which of the following statements about industry analysis is true?

Accepted Answer

A)  During any time period, rates of return of firms within industries do vary within a wide range. 
B)  Aggregate market performance accurately reflects the performance of alternative industries. 
C)  Risk of return for individual industries have not varied over time, so one can simply extrapolate past performance into the future. 
D)  All of the above. 
E)  None of the above. 
A)  During any time period, rates of return of firms within industries do vary within a wide range. 
B)  Aggregate market performance accurately reflects the performance of alternative industries. 
C)  Risk of return for individual industries have not varied over time, so one can simply extrapolate past performance into the future. 
D)  All of the above. 
E)  None of the above.

Question 8

Once it becomes clear the economy is recovering,

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 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. Obtain an estimate of the per share depreciation charge for the year 2010.

Accepted Answer

A)  $15.81 
B)  $12.35 
C)  $23.68 
D)  $25.93 
E)  $35 
A)  $15.81 
B)  $12.35 
C)  $23.68 
D)  $25.93 
E)  $35

Question 10

In which industrial life cycle stage do sales correlate highly with an economic series or the economy in general?

Accepted Answer

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

Question 11

A number of economic variables affect both the economy and industries. Which of the following statements is false?

Accepted Answer

A)  Industries with high levels of operating and financial leverage should benefit from lower inflation rates. 
B)  Banks generally benefit from volatile interest rates, while stable interest rates reduce margins. 
C)  Consumers who are optimistic about the economy will spend money on high-priced items, such as autos and houses. 
D)  The abundance or scarcity of input components can affect the perceived attractiveness of an industry. 
E)  None of the above (that is, all are true statements) 
A)  Industries with high levels of operating and financial leverage should benefit from lower inflation rates. 
B)  Banks generally benefit from volatile interest rates, while stable interest rates reduce margins. 
C)  Consumers who are optimistic about the economy will spend money on high-priced items, such as autos and houses. 
D)  The abundance or scarcity of input components can affect the perceived attractiveness of an industry. 
E)  None of the above (that is, all are true statements)

Question 12

Which of the following is needed to forecast the performance of the stock market using P/E?

Accepted Answer

A)  The future earnings per share for the stock market 
B)  The earnings multiplier for the stock market 
C)  The earnings multiplier for the key industries 
D)  Choices a and b 
E)  None of the above. 
A)  The future earnings per share for the stock market 
B)  The earnings multiplier for the stock market 
C)  The earnings multiplier for the key industries 
D)  Choices a and b 
E)  None of the above.

Question 13

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 per share EBIT for the year 2010.

Accepted Answer

A)  $95.33 
B)  $70.42 
C)  $85.56 
D)  $95.89 
E)  $75.32 
A)  $95.33 
B)  $70.42 
C)  $85.56 
D)  $95.89 
E)  $75.32

Question 14

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 industry EPS for the year 2010.

Accepted Answer

A)  $45.25 
B)  $36.79 
C)  $57.25 
D)  $32.56 
E)  $48.57 
A)  $45.25 
B)  $36.79 
C)  $57.25 
D)  $32.56 
E)  $48.57

Question 15

Which of the following statements about the business cycle is false?

Accepted Answer

A)  Toward the end of a recession, financial stocks typically increase in value as investment and borrowing activities accelerate. 
B)  Once the economy hits a trough and begins to recover, consumer durable stocks become attractive investments. 
C)  Once the economy has recovered and current levels of consumption are sustainable, businesses may consider modernizing or expanding, thus stocks of capital goods industries become attractive investments. 
D)  As the business cycle reaches a peak, inflation rates decrease. 
E)  None of the above (that is, all are true statements) 
A)  Toward the end of a recession, financial stocks typically increase in value as investment and borrowing activities accelerate. 
B)  Once the economy hits a trough and begins to recover, consumer durable stocks become attractive investments. 
C)  Once the economy has recovered and current levels of consumption are sustainable, businesses may consider modernizing or expanding, thus stocks of capital goods industries become attractive investments. 
D)  As the business cycle reaches a peak, inflation rates decrease. 
E)  None of the above (that is, all are true statements)

Question 16

Which of the following statements concerning the competitive environment is true?

Accepted Answer

A)  High fixed costs encourage firms to produce at a low level of capacity, in order to minimize fixed cost per unit produced. 
B)  Low current prices relative to costs in an industry indicate low barriers to entry. 
C)  Substantial economies of scale do not give a current industry member an advantage over a new firm. 
D)  The ability to substitute another product limits the industry's profit potential. 
E)  Buyers and suppliers do not influence the profitability of an industry. 
A)  High fixed costs encourage firms to produce at a low level of capacity, in order to minimize fixed cost per unit produced. 
B)  Low current prices relative to costs in an industry indicate low barriers to entry. 
C)  Substantial economies of scale do not give a current industry member an advantage over a new firm. 
D)  The ability to substitute another product limits the industry's profit potential. 
E)  Buyers and suppliers do not influence the profitability of an industry.

Question 17

The financial risk for the retail store industry is difficult to judge because of

Accepted Answer

A)  Convertible debt. 
B)  Numerous building leases. 
C)  Warrants. 
D)  Variable operating profits. 
E)  Extensive use of preferred stock. 
A)  Convertible debt. 
B)  Numerous building leases. 
C)  Warrants. 
D)  Variable operating profits. 
E)  Extensive use of preferred stock.

Question 18

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 19

Which of the following economic variables does not have an impact on industry analysis?

Accepted Answer

A)  Inflation 
B)  Interest rates 
C)  International economics 
D)  Consumer sentiment 
E)  None of the above (that is, all of the above economic variables have at least some impact on industry analysis) 
A)  Inflation 
B)  Interest rates 
C)  International economics 
D)  Consumer sentiment 
E)  None of the above (that is, all of the above economic variables have at least some impact on industry analysis)

Question 20

At the initial stage of an economic recovery,

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.

Because all firms in an industry do not move together there is little value in industry analysis.

Structural changes do have a cyclical pattern.

The ____ of an industry is a function of retention rate and return on equity.

What should analysts identify and monitor?

Which of the following statements about industry analysis is true?

Once it becomes clear the economy is recovering,

In which industrial life cycle stage do sales correlate highly with an economic series or the economy in general?

A number of economic variables affect both the economy and industries. Which of the following statements is false?

Which of the following is needed to forecast the performance of the stock market using P/E?

Which of the following statements about the business cycle is false?

Which of the following statements concerning the competitive environment is true?

The financial risk for the retail store industry is difficult to judge because of

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

Which of the following economic variables does not have an impact on industry analysis?

At the initial stage of an economic recovery,

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

Because all firms in an industry do not move together there is little value in industry analysis.

Structural changes do have a cyclical pattern.

The ____ of an industry is a function of retention rate and return on equity.

What should analysts identify and monitor?

Which of the following statements about industry analysis is true?

Once it becomes clear the economy is recovering,

In which industrial life cycle stage do sales correlate highly with an economic series or the economy in general?

A number of economic variables affect both the economy and industries. Which of the following statements is false?

Which of the following is needed to forecast the performance of the stock market using P/E?

Which of the following statements about the business cycle is false?

Which of the following statements concerning the competitive environment is true?

The financial risk for the retail store industry is difficult to judge because of

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

Which of the following economic variables does not have an impact on industry analysis?

At the initial stage of an economic recovery,

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