FIN 351 WEEK 2 QUIZ
1. Question : (TCO 2) The first step in any stock valuation is _____.
Student Answer: economic analysis
an accurate stock market prediction
financial analysis
industry analysis
Question 2. Question : (TCO 2) Since the stock market is the most accurate and reliable of the 10 leading indicators, _____.
Student Answer: investors need indicators which provide more lead time than the stock market
investors are able to reduce or eliminate uncertainty about trading stocks
investors are unable to forecast changes in stock prices
None of the above
Question 3. Question : (TCO 2) In which stage of the industry life cycle are companies likely to be privately owned?
Student Answer: Development
Maturity
Decline
Expansion
Question 4. Question : (TCO 2) The crossover point on the life cycle curve is the point where _____.
Student Answer: 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. Question : (TCO 2) Which of the following statements about stock valuation based on asset value is NOT true?
Student Answer: Natural resources often give a company value, even if an income stream is not produced.
The value of the assets may not even appear on the balance sheet.
Current assets are usually excluded from the valuation process, since they will be used up in the next business cycle.
Hidden assets can add substantial value to the firm.
Question 6. Question : (TCO 2) The purpose of the required rate of return is intended to provide investors _____.
Student Answer: compensation for expected inflation
a premium for risk assumed
a minimum real rate of return
All of the above
Question 7. Question : (TCO 2) P/E ratios are influenced by a company's _____.
Student Answer: growth rate
risk
capital structure
All of the above
Question 8. Question : (TCO 2) The _____ does not represent continuing operations in any way, but is simply a snapshot of the total worth of a firm at a given point in time.
Student Answer: income statement
balance sheet
source and use of funds statement
statement of cash flows
Question 9. Question : (TCO 2) _____ ratios measure the ability of a firm to earn an adequate return on sales, total assets, and invested capital.
Student Answer: Asset-utilization
Liquidity
Profitability
Debt-utilization
Question 10. Question : (TCO 2) A high payout ratio indicates that _____.
Student Answer: a firm is investing heavily in plant and equipment
a firm has high current obligations
the firm is probably in the mature phase of its life cycle, and does not have many growth opportunities available
the firm is probably in Stage II of its life cycle
USA 
India