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Devry FIN 351 Week 2 Quiz

Question 1
3 pts
(TCO 2) Investors find that economic analysis is important because they need to anticipate _____.

• changes in corporate profits due to business cycle impacts
• growth in various industry segments based on changing economic trends
• how foreign trade might affect U.S. companies
• All of the above

Question 2
3 pts
(TCO 2) Of the predictors of economic patterns and stock market movements, the best is the _____.

• money supply
• level of interest rates
• 10 leading indicators
• No one variable is best; as many as possible should be considered.

Question 3
3 pts
(TCO 2) The proper order of the industry life cycle is _____.

• development, growth, expansion, maturity, and decline
• expansion, growth, development, maturity, and decline
• development, expansion, growth, maturity, and decline
• expansion, development, growth, maturity, and decline

Question 4
3 pts
(TCO 2) 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
3 pts
(TCO 2) The purpose of stock valuation is _____.

• to set the fair market price for a given common stock
• to determine whether the common stock’s value is fairly represented by its market price
• of limited value, since the efficient market hypothesis proves that all common stock is always fairly priced
• to find common stocks whose market price equals the intrinsic value

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Question 6
3 pts
(TCO 2) 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
3 pts
(TCO 2) Which of the following would most likely affect the P/E ratio of the market in general?

• A significant change in government fiscal policy is likely to affect the P/E ratio.
• Declining earnings of the S&P 500 companies are likely to affect the P/E ratio.
• Investors’ expectations about inflation changes and becomes either more positive or more negative.
• All of the above

Question 8
3 pts
(TCO 2) The statement of cash inflows and outflows shows all of the following, except _____.

• how the firm’s balance sheet changed from one period to another
• how funds from operations were used to finance the company’s assets
• how the firm has matched short-term and long-term sources of funds with short-term and long-term uses of funds
• the firm’s cost of new borrowing

Question 9
3 pts
(TCO 2) The primary purpose of the liquidity ratios is to determine _____.

• how much working capital is tied up in inventory
• the relative level of short-term debt
• how well a firm is able to pay off short-term obligations
• More than one of the above

Question 10
3 pts
(TCO 2) _____ ratios measure the impact of external market forces on the internal performance of a firm.

• Price
• Profitability
• Liquidity
• Asset-utilization