FINAL EXAM

Question 1

includes the assessment of how the global economy affects

Answer 1

Fundamental analysis

Question 2

the study of past market data of prices and volume to predict future price movements

Answer 2

Technical analysis,

Question 3

considers the company’s earnings, management, economic outlook, competition, market condition, and other factors in the determination of a firm’s intrinsic value.

Answer 3

Fundamental Analysis

Question 4

focuses directly on a company’s fundamentals,

Answer 4

Bottom-up Approach

Question 5

it is the
combination of traditional economic and business concepts that
determine the value of the investment. The examination of these
variables is called the

Answer 5

Valuation Process

Question 6

analyst or investors look at
how economic factors, both global and local, and how the
overall market can affect the value of the stock prices.

Answer 6

Top Down Approach

Question 7

macroeconomic indicators:

Answer 7

GNP/GDP growth rates;
foreign exchange rates (FOREX);
Tbill rates (91-day),
and inflation rate.

Question 8

A company that
follows the rise and fall of the GNP is sensitive to business
cycles, while those which are less or are not affected are called

Answer 8

Defensive companies

Question 9

The main
objective of the fundamental analysis is to arrive at the

Answer 9

Intrinsic Value

Question 10

The concept of intrinsic value distinguishes it being based on

Answer 10

assets
earnings
prospects
management

Question 11

If intrinsic value is less than market price, the firm is

Answer 11

Overvalued

Question 12

Valuation Methods

Answer 12

Net Asset Value Method
Capitalized Earning Method
Enterprise Multiple
Discounted Cash Flow Model

Question 13

This method uses the company’s balance sheet as basis for
valuation.

Answer 13

Net Asset Value Method

Question 14

adopts the viewpoint of a
potential investor who considers anticipated earnings as the
fundamental source of common equity value.

Answer 14

Capitalized Earning Method

Question 15

An earnings based approach

Answer 15

Capitalized Earning Method

Question 16

This approach assumes that the company will be worth some
multiple of its future earnings in the continuing period

Answer 16

Capitalized Earning Method

Question 17

NAV Meaning

Answer 17

Net Asset value

Question 18

CEM Meaning

Answer 18

Capitalized Earning Method

Question 19

P/E ratio maening

Answer 19

Price- Earnings ratio

Question 20

which is the
average price-earnings of stock of representative companies in
the sector where the company belongs to.

Answer 20

Price-Earnings Ratio

Question 21

EPS meaning

Answer 21

Earnings Per Share

Question 22

There are two critical factors in obtaining the value of a
company’s common stock through the capitalized earnings
approach:

Answer 22

the company’s earnings power and the appropriate P/E ratio.

Question 23

To obtain the value of a company’s stocks on the basis of
earnings, an analysis of its past earnings performance should
be performed.

Answer 23

Historical Earnings

Question 24

EV Meaning

Answer 24

Enterprise Value

Question 25

EM Meaning

Answer 25

Enterprise Multiple

Question 26

EBITDA Meaning

Answer 26

Earnings Before Interest, Taxes, Depreciation and Amortization

Question 27

is the sum of the values of debt and equity, net of cash.

Answer 27

Enterprise value

Question 28

is a firm value multiple that measures the actual economic value of a company at any given moment.

Answer 28

Enterprise Value

Question 29

number of shares outstanding times current share price while debt and cash are included in the books which the acquirer assumes.

Answer 29

Market Capitalization

Question 30

is considered as a firm measure similar to Free Cash Flow

Answer 30

EBITDA

Question 31

use the cash flow statements as basis for valuation.

Answer 31

Discounted Cash Flow Model

Question 32

DCF Meaning

Answer 32

Discounted Cash Flow

Question 33

Application of the DCF method

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Excess Cash Flow Terminal Value Discount Rate

Question 34

are based on the company’s net operating cash flows for the forecast/projection period.

Answer 34

Excess Cash Flows

Question 35

is the value of an investment at the end of a period, taking into account the discount rate and the method used in computing it.

Answer 35

Terminal Value

Question 36

The two methods used in determining the company’s terminal Values are

Answer 36

Residual Asset Method Perpetuity of Earnings Method

Question 37

assumes that the company’s residual assets

Answer 37

Residual Asset Method

Question 38

is the rate of expected return that the market requires for investments that are comparable in terms of risk and other characteristics.

Answer 38

Discount Rate

Question 39

ROE Meaning

Answer 39

Return on Equity

Question 40

WACC Meaning

Answer 40

Weighted Average Cost of Capital

Question 41

is composed of the weighted costs of the various components of financing a company’s capital structure which are debt and equity.

Answer 41

WACC

Question 42

The rate of return on treasury bills issued by the government

Answer 42

Risk Free Rate

Question 43

is the rate given to preferred companies by banks

Answer 43

Prime Lending Rate

Question 44

Is a method of securities analysis that makes use of historical price patterns to determine an optimal entry and exit

Answer 44

Technical Analysis

Question 45

Technical analysis is driven by three underlying major premises

Answer 45

Market Action Discounts everything Prices move in trends History Repeats itself

Question 46

it is the major premise of technical analysis.

Answer 46

Market action Discounts everything

Question 47

prices over a period of time move in a particular direction until it is reversed.

Answer 47

Prices move in trends

Question 48

as prices move in trends, recognizable patterns unfold along the way. Over the long run, these are repeated.

Answer 48

History Repeats Itself

Question 49

These computer-generated maps driven by sophisticated algorithms are dynamic and are updated real time whenever there are movements in the securities it track.

Answer 49

Surface Maps

Question 50

One particular advantage that technical analysis seems to have over fundamental analysis is its

Answer 50

Universality

Question 51

which are based on the prices, are used in conjunction with the charts to fine-tune the investment decision.

Answer 51

Oscillators

Question 52

is constructed by connecting with a line the security’s daily closing prices over a particular period

Answer 52

Line CHart

Question 53

It is the simplest form of a price chart

Answer 53

Line chart

Question 54

also known as the American bamboo chart,

Answer 54

Bar Chart

Question 55

is a general direction in which prices, or the market, are moving.

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Trend

Question 56

is represented by higher highs and lows

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Uptrend

Question 57

Is represented by lower highs and low

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Downtrend

Question 58

As prices are collection of trends, these are broken down into three classifications, namely;

Answer 58

Major term intermediate term short term

Question 59

is one that lasts for at least six months and may continue for years

Answer 59

Major Trend

Question 60

is one that lasts for a few weeks to several months

Answer 60

Intermediate Trend

Question 61

is one that lasts for a few minutes to a few days.

Answer 61

Short Trend

Question 62

is a price level wherein there are more sellers than buyers

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Resistance

Question 63

is a price level wherein there are more buyers than sellers

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Support

Question 64

is one in which the trend line’s angle of rise or fall is gradual or up to about 45 degrees from the horizontal.

Answer 64

Sustainable Trend

Question 65

are those that signal or identify a change in the direction of the trend.

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Reversal Pattern

Question 66

are those that identify minor countertrends or corrections within an unfolding trend.

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Consolidation Patterns

Question 67

The basic reversal patterns are:

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V or spike, reversal days, exhaustion gap, island reversal, double or triple tops/bottoms, head-and-shoulders, and the saucer or rounding top/bottom.

Question 68

is a one-day reversal pattern.

Answer 68

V or Spike

Question 69

Selected Technical Indicators

Answer 69

Moving Averages Bollinger Bands Oscillators Volume Volume Oscillators

Question 70

is a trend following tool. It is the average of a set of closing prices

Answer 70

Moving Averages

Question 71

Three types of moving averages are used:

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Simple, weighted and exponential Moving Average

Question 72

is the arithmetic mean of the data set.

Answer 72

Simple Moving Average

Question 73

assigns weight values to the data set.

Answer 73

Weighted Moving Average

Question 74

is a more complex form of the weighted average designed to further correct the weighing problem for a data set.

Answer 74

Exponintial Average

Question 75

are mathematical or statistical measures of the velocity of price movements.

Answer 75

Oscillators

Question 76

The objectives of the use of oscillators are:

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a) to identify divergence with the price; and b) overextended readings.

Question 77

occurs when the market price and the oscillator’s trend head in opposite directions.

Answer 77

Divergence

Question 78

give hints as to the continuity and/or reversal of a trend, and hints of price support and resistance.

Answer 78

Turnover Dynamics