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

Grading
SummaryQuestion Type: # Of Questions: Multiple Choice 22

Grade
Details – All QuestionsQuestion 1. 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
2. Question : Investors are most interested in which one of the following
ratios?
Student
Answer: return on assets
current
ratio
net
profit margin
return
on equity

Question
3. Question : Fundamental analysis involves the in-depth study of the
Student
Answer: role of nondiversifiable risk in an investor’s portfolio.
financial
condition and operating results of a given firm.
pattern
of security prices as revealed in chart formations.
role
of diversifiable risk in an investor’s portfolio.

Question
4. Question : One underlying premise of fundamental analysis is that the market
price of any security consistently represents the true value of the underlying
firm.
Student
Answer: True
False

Question
5. Question : When the economic outlook for an industrial sector is strong, the
outlook for many of the stocks of firms within that sector will also be strong.
Student
Answer: True
False

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

Question
7. Question : A companies ratios are more meaningful when compared to other
companies in the same industry.
Student
Answer: True
False

Question
8. Question : Fundamental analysis is based on the presumption that the value
of a stock is influenced by the financial performance of the issuing company.
Student
Answer: True
False

Question
9. Question : The stage in an industry’s growth cycle in which product
acceptance is spreading, investors can foresee the industry’s future, and
overall economic variables have little to do with the industry’s overall
performance, is known as the
Student
Answer: initial development stage.
rapid
expansion stage.
mature
growth stage.
stability
or decline stage.

Question
10. 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
11. Question : The PEG ratio
Student
Answer: preferred by investors is equal to 2.0 or higher.
compares
the price/earnings ratio to the rate of growth of the company’s earnings.
is a
measure of a firm’s liquidity.
measures
the ability of a firm’s assets to generate growth for the firm.

Question
12. Question : If a company’s ROA is high, then an investor can assume that the
company
Student
Answer: is in danger of defaulting on its loans.
pays a
high dividend.
is
profitable.
has
more equity than debt in its capital structure.

Question
13. Question : Stock prices tend to be a leading indicator of the level of
economic activity.
Student
Answer: True
False

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

Question
15. Question : Generally, the market price of a stock is
Student
Answer: below its book value.
above
its book value.
equal
to its par value.
equal
to its book value.

Question
16. Question : Return on assets is a very important analytical tool because it
measures how effectively management is using a firm’s assets to generate
profits.
Student
Answer: True
False

Question
17. Question : An investment should offer an expected return commensurate with
the risk involved.
Student
Answer: True
False

Question
18. Question : Price-to-book-value indicates how aggressively a stock is being
priced.
Student
Answer: True
False

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

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

Question
21. 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
22. Question : The Federal Reserve through monetary policy can help expand the
economy by
Student
Answer: lowering income taxes on individuals.
reducing
tariffs such that foreign exports can increase.
supporting
a moderate growth of the money supply.
increasing
government spending on the national infrastructure.