Principles of Finance, 6e
Besley/Brigham
Chapter 17
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 33
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
faced with situations they have faced in the past.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Technical Analysis
82. Market breadth indicators used by technical analysts provide a good indication of the “mood,” or psychology, of the
market.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Technical Analysis
83. Investors who search for “value” stocks are trying to find stocks that are mispriced in the markets.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Value of Stocks
84. The economic value added (EVA) valuation method might be the most attractive valuation method because it does not
require estimation of unknown factors and it ties the value creation process to changes in a firm’s capital structure and
changes in a firm’s efficiency.
a.
True
b.
False
ANSWER:
True
POINTS:
1
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 36
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Industry Life Cycle
92. If an investor wishes to better diversify her investment portfolio, which consists of the common stocks of many of the
firms that are in the Dow Jones Industrial Average, she probably should invest in some companies that are in those
industries that are classified as countercyclical, or defensive.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Industry Characteristics
93. If an investor wishes to better diversify her investment portfolio, which consists of the common stocks of many of the
firms that are in the Dow Jones Industrial Average, she probably should invest in some companies that are in those
industries that are classified as cyclical.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Industry Characteristics
94. The dividend discount model (DDM) cannot be used to value the stock of a company that has never paid a dividend
and does not expect to pay a dividend in the near term.
a.
True
b.
False
ANSWER:
False
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 39
101. Industries that include durable goods manufacturers generally are more sensitive to interest rate changes than
industries that include staple goods firms.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Industry Characteristics
102. In general, financial statement analysis involves a comparison of a firm’s operating performance and financial
position with that of other firms in the same line of business and can be used to form expectations about the firm’s future
cash flow distributions.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Financial Statement Analysis
103. The easiest input to successful ratio analysis is the judgment used when interpreting the results to reach an overall
conclusion about the firm’s financial position.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Financial Statement Analysis
104. To determine the appropriate P/E multiple for an individual firm simply take the average P/E multiple for the firm’s
industry and multiply it by the beta for the individual firm.
a.
True
b.
False
Principles of Finance, 6e
Besley/Brigham
Chapter 17
Cengage Learning Testing, Powered by Cognero
Page 40
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
P/E Multiple
105. The Dow Theory states that as long as the Dow Jones Industrial Average and the Dow Jones Transportation Average
move in the same direction, the market will continue its current trend.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Technical Analysis
106. The Dow Theory states that as long as the Dow Jones Industrial Average and the Dow Jones Transportation Average
move in the same direction, the market will reverse its current trend.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-09 – Investments
Time Estimate-a – 5 min.
TOPICS:
Technical Analysis
107. The consensus advice from successful professional investors is that individuals should “buy and hold” their
investments until either personal goals or market conditions change.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
