Question 1. The primary purpose of fundamental stock valuation is to _____.
eliminate stocks of those companies that are potential losers from the portfolio
identify for purchase those companies that are fundamentally undervalued
learn to identify peaks and troughs of the business cycle
All of the above
Question 2. Some of the major leading indicators would be _____.
money supply (M2), consumer expectations, and stock prices (S&P 500)
personal income, employees on nonagricultural payrolls, and industrial production
average prime rate charged by banks, labor cost per unit of output, and commercial and industrial loans outstanding
All of the above
Question 3. In which stage of the industry life cycle are companies likely to be privately owned?
Development
Maturity
Decline
Expansion
Question 4. The crossover point on the life cycle curve is the point where _____.
the company issues stock in an initial public offering (IPO)
the company gets listed on an organized exchange
the company's industry moves from the growth stage to the expansion stage
the industry's products begin to be accepted by the marketplace
Question 5. Which of the following statements about stock valuation based on asset value is NOT true?
Natural resources often give a company value, even if an income stream is not produced.
The value of the assets may not even appear on the balance sheet.
Current assets are usually excluded from the valuation process, since they will be used up in the next business cycle.
Hidden assets can add substantial value to the firm.
Question 6. The primary difference between dividend valuation models and earnings valuation models is _____.
selecting the appropriate discount rate
dividends are not considered in earnings models
whether the investor's income stream or the firm's income stream is measured
More than one of the above
Question 7. P/E ratios are influenced by a company's _____.
growth rate
risk
capital structure
All of the above
Question 8. The major device for measuring the profitability of a firm over a defined period of time is the _____.
income statement
balance sheet
statement of cash flows
None of the above
Question 9. Asset-utilization ratios measure _____.
: productivity of fixed assets in terms of sales.
the relationship of sales on the income statement to various assets on the balance sheet.
the firm's ability to pay off short-term obligations as they come due.
All of the above
Question 10. _____ ratios measure the impact of external market forces on the internal performance of a firm.
Price
Profitability
Liquidity
Asset-utilization