Return on equity (ROE) measures management's ability to make a profit:

from the money that shareholders have invested.

The price-earnings (PE) ratio measures:

investors' expectations about a company's performance.

Which statement is true about fundamental analysis of a security?

Even experts disagree about the important ratios to consider

Which is an appropriate investment objective for a mutual fund with a buy-and-hold approach?

seeking long-term capital appreciation

Which is a poor way to find companies in which to invest?

Follow suggestions in unsolicited e-mails and phone calls.

The most important factor to consider when choosing an investment is:

whether the investment supports financial goals.

When assessing a stock by using fundamental analysis, an investor should consider:

qualitative and quantitative factors

Too much diversification in a financial portfolio can:

dilute the value of big gains on an individual stock

To “consider the cost” before selling an investment, is to:

estimate the effect of commissions & taxes on a transaction

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BF21 - 3.03 Select investments

13 termsStudBud Administration175 plays

3.03 Select investments to generate revenue for clients

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Questions 13

Answers

1
Return on equity (ROE) measures management's ability to make a profit:
by becoming more efficient in operations.
by becoming shareholders of smaller firms.
from the money that shareholders have invested.
from the money generated by sales
2
The price-earnings (PE) ratio measures:
stock price compared to sales
management's ability to streamline operations.
stock price compared to shareholders' equity
investors' expectations about a company's performance.
3
Which statement is true about fundamental analysis of a security?
It is complicated, and inappropriate for beginning investors
Even experts disagree about the important ratios to consider
The only valid method is based on the work of Warren Buffett
It results in a reliable prediction of the stock price
4
Which is an appropriate investment objective for a mutual fund with a buy-and-hold approach?
investing primarily in a diversified portfolio
seeking long-term capital appreciation
investing in stocks with superior growth potential
covering a broad range of industries
5
Ratios are calculated by:
multiplying one number by another.
adding or subtracting, depending on the ratio.
dividing one number by another
multiplying or dividing, depending on the ratio
6
Which is a poor way to find companies in which to invest?
Follow suggestions in unsolicited e-mails and phone calls.
Read reputable investment magazines and newspapers
Discuss investment opportunities with family and friends
Investigate businesses with interesting products & services
7
The most important factor to consider when choosing an investment is:
the short-term profitability of the investment.
whether the security pays an annual dividend.
whether the investment supports financial goals.
the stockholder's ability to influence company decisions
8
The PEG ratio is unique because it incorporates price, earnings, and:
growth rate of earnings
growth of EPS.
gross profit.
gross sales.
9
When assessing a stock by using fundamental analysis, an investor should consider:
recent trends that might affect the short-term
a chart of the price over the last year
only ratios and other quantitative factors
qualitative and quantitative factors
10
Financial ratios measuring the ability of a company to turn available resources into cash are…
profitability ratios.
asset management ratios
debt ratios
liquidity ratios
11
Too much diversification in a financial portfolio can:
keep stock fund managers from doing their jobs
prevent a stock from growing in value
dilute the value of big gains on an individual stock
cause other investors to avoid a particular stock
12
To “consider the cost” before selling an investment, is to:
negotiate for a better, cost-saving deal
review every one of the costs she has incurred thus far.
calculate the costs of prior transactions
estimate the effect of commissions & taxes on a transaction
13
For assessing the value of a stock, which represents an invalid qualitative factor to consider?
employing experienced managers
staying on top of trends
paying the CEO a reasonable amount
offering more healthful food

BF21 - 3.03 Select investments Flashcards | StudBud