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.