Analyst forecasts which focus on a top-down approach to forecasting future performance are most likely paying attention to:A. Macroeconomic factors such as gross domestic product (GDP)B. Signals from individual companies within an industry firstOC. Microeconomic factors such as dividend yields on bio-technology stocks (shares)

Top down approach in fundamental analysis involves analysis of macroeconomic factors first, then…

Analyst forecasts which focus on a top-down approach to forecasting future performance are most likely paying attention to O A. Macroeconomic factors such as gross domestic product (GDP) O B. Signals from individual companies within an industry first OC. Microeconomic factors such as dividend yields on bio-technology stocks (shares)

Analyst forecasts which focus on a top-down approach to forecasting future performance are most likely paying attention to O A. Macroeconomic factors such as gross domestic product (GDP) O B. Signals from individual companies within an industry first OC. Microeconomic factors such as dividend yields on bio-technology stocks (shares)

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter2: Descriptive Statistics

Section: Chapter Questions

Problem 25P: The scatter chart in the following figure was created using sample data for profits and market...

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The file Fortune500 contains data for profits and market capitalizations from a recent sample of firms in the Fortune 500 a. Prepare a scatter diagram to show the relationship between the variables Market Capitalization and Profit in which Market Capitalization is on the vertical axis and Profit is on the horizontal axis. Comment on any relationship between the variables. b. Create a trendline for the relationship between Market Capitalization and Profit. What does the trendline indicate about this relationship?
Calculate the projected price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?
What are some qualitative factors that analysts should consider when evaluating a company’s likely future financial performance?
Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). What is the preferred market segment for the investor, and what is the expected return percentage? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?
The data in Exhibit 11.3 on industry median betas suggest that firms in the following three sets of related industries have different degrees of systematic risk. REQUIRED a. For each matched pair of industries, describe factors that characterize a typical firms business model in each industry. Describe how such factors would contribute to differences in systematic risk. b. For each matched pair of industries, use the CAPM to compute the required rate of return on equity capital for the median firm in each industry. Assume that the risk-free rate of return is 4.0% and the market risk premium is 5.0%. c. For each matched pair of industries, compute the present value of a stream of 1 dividends for the median firm in each industry. Use the perpetuity-with-growth model and assume 3.0% long-run growth for each industry. What effect does the difference in systematic risk across industries have on the per-dollar dividend valuation of the median firm in each industry?
The scatter chart in the following figure was created using sample data for profits and market capitalizations from a sample of firms in the Fortune 500. a. Discuss what the scatter chart indicates about the relationship between profits and market capitalization? b. The data used to produce this are contained in the file Fortune500. Calculate the covariance between profits and market capitalization. Discuss what the covariance indicates about the relationship between profits and market capitalization? c. Calculate the correlation coefficient between profits and market capitalization. What does the correlations coefficient indicate about the relationship between profits and market capitalization?
When considering a top-down approach to fundamental analysis, the impact of macroeconomic factors on a stock’s price can have which of the following effects? an increase in real GDP is followed by improvement in current and expected future profits for companies, leading to higher stock price. an increase in real GDP is followed by performance of industries and subsequent improvement in current and expected future profits for companies, leading to higher stock prices. an increase in real GDP, followed by a significant performance of cyclical industries such as automobile and consumer discretionary, will lead to higher stock prices.
__________ focus more on underlying determinants of future profitability than the past price movements of a firm's stock. A) Credit analysts B) Fundamental analysts C) Systems analysts D) Technical analysts Please provide an accurate answer.
When analyzing key macroeconomics to assess GDP growth/decline, how would you measure the performance relative to sequential and year-to-year data?How will your analysis assist you in determining the direction of the stock market?Why do you consider the relationship between the economy and the stock market an integral part of the investment process? Explain your reasoning.
Discuss your assumptions on the key factors such as industry characteristics, firm characteristics, sales growth, profit margin, dividend policy, asset requirement, and leverage. How do these factors affect your forecasting of financial statements? And discuss why the circular reference occurs between the proforma income statement and balance sheet in your forecasting model?
Financial analysts have developed two performance measures: Market Value Added (MVA) and Economic Value Added (EVA). Discuss and explain both. Which is a better representative of the firm’s performance, and why?
How do managers, bankers, and security analysts use (a) trend analysis, (b) benchmarking,(c) percent change analysis, and (d) commonsize analysis?