Investment TOPIC 3a

Principles of Security Analysis

• monetary value

• Intrinsic value

• Extrinsic value

Intrinsic value depends upon several factors;

• The discount rate

• Estimates of the stock’s future cash flows

• The risk associated with future performance

Understanding the outlook and risks inherent in an industry gives valuable insight about the outlook for and risks inherent in individual companies, and their securities, that makeup that industry.

• Economic Analysis

• industry Analysis

• Trend Analysis

Growth cycle listed below EXCEPT:

• Initial Development

• Rapid Expansion

• Mature Growth

• Moving Forward

Fundamental analysis: the study of the financial affairs of a business for the purpose of understanding the company that issued the common stock.

• TRUE

• FALSE

Liquidity ratios: company’s ability to meet its day-to-day operating revenue and satisfy its short-term obligations as they come due.

• TRUE

• FALSE

Current Ratio: measures a company’s ability to meet its short-term liabilities with its short-term assets.

• TRUE

• FALSE

Net Working Capital: indicates the dollar amount of equity in the working capital position of the firm.

• TRUE

• FALSE

Account Receivable Turnover Ratio: Captures the relationship between a firm’s receivables balance and its revenue

• TRUE

• FALSE

Inventory Turnover Measure: How quickly the company is selling its inventory.

• TRUE

• FALSE