Devry FIN 351 Week 2 Quiz


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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



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