CFAI 2024 EQ M5

Which of the following statements about initiation reports is true?

• 1. The structure, content, and tone of the report are independent of the analyst’s setting

• 1. The report makes updates to the recommendation after the issuer reports financial results

• 1. The primary audience is those who are not already knowledgeable about the issuer or security

If you read a research report that includes both a Porter’s Five Forces analy- sis and a PESTLE analysis, then most likely:

• 1. the authoring analyst is initiating coverage

• 1. the report is updating a recommendation after an earnings release

• the report is written by a firm’s analyst who has covered the company for many years

The evaluation of a company’s competitive strategy takes place before the:

• 1. analysis of revenue and revenue drivers

• 1. analysis of operating profitability and working capital

• 1. forecasting of revenue, operating profitability, and working capital

"Reports and data from platforms" is from:

• Public third-party sources

• Proprietary third-party sources

• Proprietary primary research

Analyzing "Quantity and Price" drivers is:

• Top-down approach and Revenue analysis

• Top-down approach and Liquidity analysis

• Bottom-up approach and Liquidity analysis

• Bottom-up approach and Revenue analysis

How many statements are true?

1. 1. Market share: The ratio of the company’s revenue to the market size in top-down approach

2. 2. Market size: The total revenue of all the companies in the market in top-down approach

3. 3. GDP growth: The GDP growth in the country where the market is

   located in top-down approach

• 0

• 1

• 2

• 3

Which market has the lowest pricing power?

• perfectly

  competition

• monopolistic

  competition

• oligopoly

• monopoly

We can categorize operating costs in the following three ways except:

• Behavior with Output

• Nature

• Function

• Purpose

Degree of financial leverage (DFL): is a quantitative measure of the sensitivity of changes in a company’s net income (or EPS) to changes in ...

• revenue

• operating income

• net income

• COGS

The amount of ... in the operating cost structure of an issuer is

referred to as degree of operating leverage (DOL).

• total cost

• variable cost

• fixed costs