WorksheetsBBMF3304 Chapter 9 Company Analysis
Total questions: 15
Worksheet time: 11mins
Name
Class
Date
1.
Analyze the difference between growth stocks and growth companies.
a)
Growth companies consistently experience above-average increases in sales and earnings.
b)
Growth stocks always outperform growth companies.
c)
Growth companies have lower risk than growth stocks.
d)
Growth stocks are the same as defensive stocks.
2.
Evaluate why stock of a great company may not be a good investment.
a)
Great companies always have a lower risk.
b)
It is always undervalued in the market.
c)
It yields a higher return than other stocks.
d)
It may be overpriced compared to its intrinsic value.
3.
Identify the key characteristic of speculative stocks.
a)
Low risk and high stability.
b)
High probability of low or negative returns.
c)
Consistent earnings growth.
d)
Defensive against economic downturns.
4.
Understand why defensive companies perform well during economic downturns.
a)
They rely on speculative investments.
b)
They focus only on growth industries.
c)
They have low business and financial risk.
d)
They have high beta values.
5.
Apply the concept of P/E ratio in company analysis.
a)
P/E ratio measures company liquidity.
b)
P/E ratio compares a company’s market price to its earnings per share.
c)
P/E ratio evaluates a company’s cash flow.
d)
P/E ratio is used for defensive stocks only.
6.
Analyze why value stocks may appear undervalued.
a)
They experience higher-than-average growth.
b)
They are immune to market risks.
c)
They always generate above-average returns.
d)
They have low P/E or price-to-book ratios.
7.
Explain why cyclical companies’ performance is tied to the economy.
a)
They are protected from economic cycles.
b)
They rely on speculative investments.
c)
Their sales and earnings are heavily influenced by aggregate business activity.
d)
They perform better in economic downturns.
8.
Determine which firms are examples of defensive companies.
a)
Public utilities and grocery chains.
b)
Oil exploration firms.
c)
Steel and auto manufacturers.
d)
High-tech startups.
9.
Classify a firm involved in oil exploration as a type of company.
a)
Defensive company.
b)
Speculative company.
c)
Growth company.
d)
Cyclical company.
10.
Understand the purpose of SWOT analysis in company analysis.
a)
To calculate a company’s cash flow.
b)
To estimate future stock returns.
c)
To identify a company’s strengths, weaknesses, opportunities, and threats.
d)
To compare a company’s P/E ratio with industry peers.
11.
Apply Peter Lynch’s investment strategy when analyzing firms.
a)
Focus on industry trends over company fundamentals.
b)
Only invest in companies with a P/E ratio below 10.
c)
Avoid companies that buy back shares.
d)
Invest in companies you understand from everyday experiences.
12.
Identify a factor that would be considered a company weakness in SWOT analysis.
a)
Market leadership in product innovation.
b)
Competitors having exploitable advantages.
c)
A growing market for the firm’s products.
d)
Favorable exchange rate shifts.
13.
Evaluate a company’s growth rate using the DDM formula.
a)
g = RR × ROE
b)
g = Earnings ÷ Sales
c)
g = P/E ratio × dividend payout
d)
g = ROE ÷ Market Value
14.
Understand why value stocks have low price-to-book ratios.
a)
Because they consistently grow faster than market averages.
b)
Because they have speculative growth prospects.
c)
Because they outperform defensive stocks in downturns.
d)
Because they appear undervalued for reasons beyond earnings growth potential.
15.
Apply the concept of owner earnings in financial analysis.
a)
Free cash flow after capital expenditures.
b)
Return on equity before dividends.
c)
Earnings per share after tax.
d)
Cash flow before dividends.
100 %
