Question 1

____ would be classified as a countercyclical industry.

Accepted Answer

Countercyclical industries are those that perform well during economic downturns and recessionary periods. Tobacco, being a non-discretionary product, is less affected by changes in the economy and is typically considered a countercyclical industry. Airlines, hotels, and autos are typically classified as cyclical industries, meaning they are more heavily influenced by the state of the economy and tend to perform well during strong economic periods.

Question 2

Johnson and Grubb,Inc.has 26,000 shares of common stock outstanding with a market value of $78 a share.Johnson and Grubb's total sales over the past year were $2,500,000.What is this company's price-to-sales ratio?

Accepted Answer

The answer of Johnson and Grubb,Inc.has 26,000 shares of common...

Question 3

____ analysis is a method of evaluating securities that focuses on statistics generated by market activity,such as past prices and sales volume.

Accepted Answer

Technical analysis is a method of evaluating securities that focuses on statistics generated by market activity, such as past prices and sales volume. It helps traders identify trends and potential trading opportunities by analyzing charts and other technical indicators. In contrast, fundamental analysis looks at a company's financial and economic factors to determine its intrinsic value, while value analysis involves identifying undervalued stocks. Speculative analysis involves predicting future market trends without necessarily relying on data or analysis.

Question 4

A stock that tends to trade at a low price relative to its company fundamentals is labeled a​

Accepted Answer

A value stock is a stock that is undervalued relative to its company fundamentals. This means that its price may be lower than what is deemed to be its true worth based on its financial ratios and other factors. Income stocks tend to pay high dividends, growth stocks tend to have high potential for future growth, and preferred stocks have features that are different from common stocks.

Question 5

Anderson Equipment Corporation has total after-tax earnings of $915,000 and 400,000 shares of common stock outstanding.What are the earnings per share for Anderson Equipment?

Accepted Answer

Earnings per share (EPS) is calculated by dividing the total after-tax earnings by the number of shares of common stock outstanding. For Anderson Equipment Corporation, EPS = $915,000 / 400,000 shares = $2.29 per share.

Question 6

What type of investor believes that the market isn't always efficient and that it is possible to find companies that are trading for less than they are worth?

Accepted Answer

A value investor believes in the concept of value investing, which is a strategy of investing in companies that are undervalued by the market. They believe that the market is not always efficient and that it is possible to find companies that are trading for less than they are worth. The goal of value investing is to buy these undervalued companies and hold them until the market recognizes their true value, leading to an increase in their stock price.

Question 7

An investor who expected an economic downturn would want to put his or her stock portfolio in ____ stocks.

Accepted Answer

An investor who expects an economic downturn would want to put his or her stock portfolio in countercyclical stocks, which are stocks of companies that can perform well during a recession or economic downturn. These companies may include utilities, healthcare, and consumer staples, which tend to be in demand regardless of economic conditions.

Question 8

A company that has a capitalization of $300 million to $2 billion is called a ____ stock.

Accepted Answer

The answer of A company that has a capitalization of...

Question 9

____ would be classified as cyclical industries.

Accepted Answer

Cyclical industries are those that are heavily affected by business cycles, meaning they experience periods of economic growth and contraction. Airlines are a classic example of a cyclical industry as they are affected by factors such as discretionary consumer spending, business travel, fuel costs, and global economic conditions.

Question 10

The term used to evaluate the profitability of a firm on a common-stock per-share basis is

Accepted Answer

The term used to evaluate the profitability of a firm on a common-stock per-share basis is earnings per share (EPS). EPS is calculated by dividing a company's net income by the number of shares of common stock outstanding. It is one of the most commonly used metrics to evaluate a company's financial performance and profitability. The other options listed are not used to evaluate profitability on a per-share basis but rather relate to dividends and stock prices.

Question 11

Jensen and Flubb,Inc. ,has 17,000 shares of common stock outstanding with a market value of $86 a share.Jensen and Flubb's total sales over the past year were $2,860,000.What is this company's price-to-sales ratio?

Accepted Answer

The price-to-sales ratio is calculated by dividing the company's market capitalization by its total sales. The market capitalization is found by multiplying the number of shares outstanding by the market value per share, which is 17,000 shares * $86/share = $1,462,000. The total sales are $2,860,000. Therefore, the price-to-sales ratio is $1,462,000 / $2,860,000 = 0.51.

Question 12

An investor using the fundamental approach would look at​

Accepted Answer

An investor using the fundamental approach considers all of these factors - the management of the company, the outlook for the profitability of the industry, and the value of an individual company. This approach involves analyzing the financial and economic factors of a company in order to determine its intrinsic value and make investment decisions based on this analysis.

Question 13

Which of the following statements regarding cash dividends is true?​

Accepted Answer

Growth and speculative companies typically reinvest their earnings into the business rather than paying out cash dividends to shareholders. This is because their focus is on expanding the business and achieving higher returns in the future rather than providing immediate income to shareholders. Therefore, they may pay little or no cash dividends.

Question 14

Maxwell Communications Corporation has after-tax earnings of $1,508,000 after paying $45,000 in dividends to its 10,000 preferred stockholders.If Maxwell has 500,000 common stockholders,its earnings per share are​

Accepted Answer

First, we need to calculate the total amount paid to preferred stockholders:

$45,000 divided by 10,000 shares = $4.50 per share

Total payment to preferred stockholders = $4.50 x 10,000 shares = $45,000

Subtract this from the total after-tax earnings to get the earnings available for common stockholders:

$1,508,000 - $45,000 = $1,463,000

Divide this by the total number of common stockholders:

$1,463,000 divided by 500,000 shares = $2.926 per share

Therefore, the earnings per share for common stockholders is $2.926 or approximately $3.02 when rounded to the nearest cent. The answer is D.

Question 15

Some of the least risky stocks on the market are called​

Accepted Answer

Blue-chip stocks are considered to be some of the safest and least risky stocks on the market due to their stable earnings, strong financial position, and well-established reputation. They are typically large, well-known companies with a proven track record of success, which makes them a safe investment option for investors.

Question 16

Blue-chip stocks typically have betas of.

Accepted Answer

Blue-chip stocks are established and stable companies with a long history of growth and stability. As a result, they typically have a beta of 1.0, meaning they move in line with the overall market. Beta values less than 1.0 indicate less volatility than the market, and values greater than 1.0 indicate more volatility than the market. A beta of 0.0 would indicate that the stock has no correlation with the market, which is highly unlikely for blue-chip stocks. A beta of 1.5 or more would indicate that the stock is significantly more volatile than the market, which is also unlikely for blue-chip stocks.

Question 17

Market analysts generally recommend that investors avoid companies with a price-to-sales ratio of greater than

Accepted Answer

The answer of Market analysts generally recommend that investors avoid...

Question 18

A ____ stock is one that has little or no track record but has a potential for substantial earnings at some time in the future.

Accepted Answer

A speculative stock is one that is considered a high-risk investment due to little or no track record or history of earnings, but has the potential for substantial earnings at some time in the future. Fundamental stocks are those that are considered to be financially sound, with consistent earnings and a solid track record. Growth stocks are those of companies that are expected to grow at a rate faster than the overall market. Value stocks are those that are considered to be undervalued by the market, and are trading at a lower price than their intrinsic value.

Question 19

Which of the following is true regarding growth stocks?

Accepted Answer

Growth stocks often have betas of 1.5 or more, indicating a higher volatility compared to the overall market. This reflects their potential for rapid growth, which can lead to significant price swings.

Question 20

Investors who have to depend current income from their investments to supplement their living expenses should invest in ____ stocks.

Accepted Answer

Income stocks refer to stocks that pay regular dividends to their shareholders. Blue-chip stocks are stocks of well-established companies that are generally considered to be safe investments with steady returns. Both income and blue-chip stocks can provide reliable sources of current income for investors who need it to supplement their living expenses. Well-known growth and speculative stocks, on the other hand, are generally riskier investments and may not provide a reliable source of current income.

Quiz 14: Investing in Stocks and Bonds