FIN 385 Week 2 Quiz: Macroeconomic, Industry, and Financial Statement Analysis – Quiz

100% All correct answers + Instructor’s explanations!!

1. Question : (TCO 1) Which of the following characteristics of preferred stock is least important to a potential investor?

Maturity date

Stated interest rate

Whether the share’s dividends are cumulative or noncumulative
Answers 2 and 3

Answers 1, 2, and 3

2. Question : (TCO 1) If the bid price of a bond is 90 8/32, it means that a bidder is offering ____.

$90.25

$908.32

$902.50

None of the above

3. Question : (TCO 3) In the purchase and sale of securities, the “spread” refers to the difference between _______.

the IPO offering price and what larger investors are willing to pay
a stock’s par value and its strike price

a preferred stock’s par value and its conversion value

what a dealer pays for a share and what he or she sells it for

4. Question : (TCO 3) Why is equivalent taxable yield important?

It tells an investor what kind of stock would be needed to give a return equivalent to a risk-free bond.
So many people are investing in tax-free T-bills.

It’s like a flat tax on all investors.

It gives an investor an idea of what a normal bond’s interest rate would need to be in order to give an equivalent return on a tax-free municipal bond.

5. Question : (TCO 4) The dollar value of all forms of bonds issued over the last several years has approached approximately _____.

$16 million

$16 billion

$16 trillion

$3.8 billion

6. Question : (TCO 1) What is the primary role of investment bankers?

To help guide a company seeking to go public through the entire process of filing with the SEC and the eventual sale of the security
To guide a company in making the best capital investment choices
To always buy 100% of the security from the offering company to keep in its own portfolio
None of the above

7. Question : (TCO 5) Which of these statements is true about inflation?

Inflation has nothing to do with rising prices.

Usually, the lower the unemployment level, the higher the rate of inflation.
Usually, the higher the unemployment level, the higher the rate of inflation.
Inflation is not related to the unemployment rate.

8. Question : (TCO 5) Which of the following is a leading indicator?

Ratio of trade inventories to sales

Industrial production

Average duration of unemployment

Initial claims for unemployment

9. Question : (TCO 5) The balance sheet ________.

lists the company’s assets and who owns them (creditors or owners)
is usually done in the middle of an accounting period

lists assets at their true market value

tells you if the company is profitable

10. Question : (TCO 5) ROE can be improved by _______.

increasing net profits

increasing sales

increasing asset turnover

All of the above

None of the above

11. Question : (TCO 5) A high Price Earnings Mulitple _______________.

may be interpreted as a stock with low growth potential.

may be interpreted as a stock with high growth potential.

allows the investor to pay less per dollar of current earnings.
none of the above.

12. Question : (TCO 5 ) The cash ratio is _______.

current assets divided by current liabilities.

(cash + marketable securities + accounts receivable) / current liabilities.
cash divided by current assets.

(cash + marketable securities) / current liabilities.