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- Use the extended DuPont equation to provide a breakdown of Computrons projected return on equity. How does the projection compare with the previous years and with the industrys DuPont equation?A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has A. an anticipated earnings growth rate which is less than that of the average firm. B. a dividend yield which is less than that of the average firm. C. less predictable earnings growth than that of the average firm. D. greater cyclicality of earnings growth than that of the average firm.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.
- Which of the following typically is true for profitability ratios? a. Growth stocks have lower price to earnings ratios.b. Companies in more competitive industries have higher profit margins.c. The gross profit ratio declines as competition increases.d. When a company has debt, its return on equity will be lower than its return on assets.Which one of the following ratios is an indicator of the long-run safety of a firm? Question 22 options: a) profit margin b) times interest earned c) earnings per share d) return on stockholders' equityFor each of the companies described here, would you expect it to have a low, medium, or high dividend-payout ratio? Explain why. d. A dividend-paying company that experiences an unexpected drop in earnings from an upward-sloping trend line e. A company with volatile earnings and high business risk
- If we know that a firm has a net profit margin of 4.3 %, total asset turnover of 0.77, and a financial leverage multiplier of 1.36, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity?Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the probability of whether the company will face problems in operations. b. They show the profitability of the company over a specific period of time. c. They show the relative proportion of debt items with respect to shareholders' equity or total capital. d. They show the relative levels of liquid assets of the company. According to the information given in the table below, which of the following is Raw materials consumed? Opening Stock Raw Materials 32300 Purchases 128800 Freight in 4950 Sales return 2350 Wages paid to labor 78900 Closing Stock Raw Materials 28400 Select one: a. 135300 b. 149900 c. 143700 d. 137650 d. Current ratioThe stock market valuation/capitalization of a company in the NY Stock Exchange is based on the a. Expected company taxes b. Expected profitability of the company c. Expected yield curve d. None of the above
- Which of the following events would cause a company's cost of retained earnings to increase? Group of answer choices the company's stock price falls the company's forecasted growth in profits and dividends is reduced the company diversifies into a safer industry the overall beta for a company fallsOne concern when screening for stocks with low price-to-earnings ratios is that companies with low P/Es may be fi nancially weak. What criterion might an analyst include toavoid inadvertently selecting weak companies?A . Net income less than zeroB . Debt-to-total assets ratio below a certain cutoff pointC . Current-year sales growth lower than prior-year sales growthEfficient Market Hypothesis For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient. a. The stock price has risen steadily each day for the past 30 days.b. The financial statements for a company were released three days ago, and you believe you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are causing the firm’s true liquidity strength to be understated. c. You observe that the senior management of a company has been buying a lot of the company’s stock on the open market over the past week. Use the following information for the next two questions: Technical analysis is a controversial investment practice. Technical analysis covers a wide…
