Chaminade Univ MBA 754 (Investment Mgmt) Week 7 – Ch 07 Homework (Graded)

Grading
SummaryQuestion Type: # Of Questions: True/False 17 Multiple Choice 13

Grade
Details – All QuestionsQuestion 1. Question : The measure that indicates how
efficiently assets are being used to support sales is called the
Student
Answer: total asset turnover.
current
ratio.
book
value.
net
profit margin.

Question
2. Question : On March 31, Adolpha, Inc. reported the following information on
its financial statements.

What
is the available net working capital for Adolpha, Inc.?
Student
Answer: -$126,922
-$66,133
$60,789
$936,510

Question
3. Question : Which of the following business es will be negatively impacted by
a strong dollar?
Student
Answer: retailing
imports
exports
automotive

Question
4. Question : Historical comparisons will reveal whether a company’s
performance is improving or deteriorating.
Student
Answer: True False

Question
5. Question : If a company rewards executives with stock options, core earnings
will be lower than net income.
Student
Answer: True False

Question
6. Question : A high P/E ratio may be an indication that a stock is overpriced.
Student
Answer: True False

Question
7. Question : The purpose of economic analysis is to gain an insight into the
underlying health or vitality of the economy and to formulate expectations
about future security prices.
Student
Answer: True False

Question
8. Question : Firms tend to be more profitable and have higher stock values
when the economy is strong.
Student
Answer: True False

Question
9. Question : A company may appear to be profitable on its income statement,
but fail to generate strong cash flows.
Student
Answer: True False

Question
10. Question : In seeking potential stock investments, most analysts look for
companies that have PEG ratios that are equal to or less than one.
Student
Answer: True False

Question
11. Question : The security analysis process should help investors to
Student
Answer: I and IV only
II and
III only
I, II
and III only
II,
III and IV only

Question
12. Question : Top-down security analysis
Student
Answer: starts with the fundamental analysis of a firm.
includes
economic, industry, and fundamental analysis.
concentrates
on the competency of the senior management of a firm.
centers
on the past performance of a firm.

Question
13. Question : JJ Industries has a P/E ratio of 18 and an EPS of $0.93. This
means that JJ’s stock is currently selling for
Student
Answer: $16.74 per share.
$17.07
per share.
$18.00
per share.
$19.35
per share.

Question
14. Question : The business cycle reflects economic changes only in the
industrial sectors of the economy.
Student
Answer: True False

Question
15. Question : Which one of the following statements concerning accounting
reports is correct?
Student
Answer: The income statement reflects the position of a firm as of a single
point in time. The total equity of a firm is equal to the total assets plus the
total liabilities.
The
statement of cash flows identifies both the sources and the uses of cash. The
income statement reflects the amount of cash available for investment and
financing activities.

Question
16. Question : A low cash realization ratio may reveal liquidity problems in a
profitable company.
Student
Answer: True False

Question
17. Question : The government has an expansionary economic policy when it
Student
Answer: increases taxes.
increases
government spending.
promotes
rising interest rates.
limits
exports of goods and services.

Question
18. Question : Economic factors such as a weak dollar will have a negative
impact on all industrial sectors.
Student
Answer: True False

Question
19. Question : Which of the following may be signs of future problems for a
company?
Student
Answer: I and III only
II and
IV only
I, II
and IV only
I, II
and III only

Question
20. Question : Banks can use the times interest earned ratio as a measure of a
borrower’s ability to repay their loan.
Student
Answer: True False

Question
21. Question : Fundamental analysis encompasses return, but not risk, in the
valuation process.
Student
Answer: True False

Question
22. Question : A comparison of a firm’s current financial ratios to those of
prior years allows one to
Student
Answer: accurately predict the future performance of a firm.
see
how a firm’s performance compares to that of a competitor.
see
trends that are developing.
determine
if the firm is performing better than the overall industry.

Question
23. Question : A company has sales of $640,000, net profit after taxes of
$23,000, and a total asset turnover of 2.5. What is the return on assets?
Student
Answer: 3.6%
4.5%
8.1%
9.0%

Question
24. Question : Advocates of the efficient market hypothesis would argue that it
is virtually impossible for any investor to consistently outperform the market.
Student
Answer: True False

Question
25. Question : The intrinsic value of a security is based on the
Student
Answer: I and III only
III
and IV only
I, II
and III only
I, III
and IV only

Question
26. Question : An investor should buy a stock only if the prevailing market
price exceeds the intrinsic value of the stock.
Student
Answer: True False

Question
27. Question : High dividend payout ratios are more of a concern to analysts
than low payout ratios.
Student
Answer: True False

Question
28. Question : If a firm has an equity multiplier of 3, this means that the
firm has $3 in equity for every $1 in long-term debt.
Student
Answer: True False

Question
29. Question : Which stage of an industry’s growth cycle offers the greatest
opportunity for an investor who is seeking capital gains?
Student
Answer: initial development
mature
growth
stability
or decline
rapid
expansion

Question
30. Question : Developing a general economic outlook assists in the
identification of industries and firms that might be good investment
opportunities.
Student
Answer: True False