Industry and Company Analysis

Question 0

Defensive Companies

Answer 0

React less to changes in the business cycle than cyclicals

Ex: Utilities, tobacco, alcohol, cosmetics, and food companies

Question 1

Cyclical Companies

Answer 1

Performance is tied to the business cycle.

Ex: Basic industries (rubber, steel, etc), construction, and durable goods manufacturers

Question 2

Interest-Rate-Sensitive Companies

Answer 2

React to changes in interest rates as they are highly levered

Ex: Utilities

Question 3

Stages of the Stock Market Cycle and beneficiary sectors

Answer 3

1) Early to middle bull market: Credit-related industries, construction, durable consumer goods, transportation
2) Middle to late bull market: Capital goods, Some financials
3) Late bear market: Nondurable consumer goods, utilities, some enegy companies

Question 4

Industry Life Cycle

Answer 4

1) Birth and Early Development
2) Rapid Growth
3) Mature Growth
4) Steady/Decline

Question 5

Methods for maintaining growth

Answer 5

1) Steady penetration of rapidly growing markets
2) Accelerating penetration of markets with stable growth rates
3) Accelerating penetration of rapidly growing markets

Question 6

What are the two major factors that influence the pattern of industry profits?

Answer 6

Unit Costs & Pricing Strategies

Question 7

Unit Costs

Answer 7

Cost for producing one unit of good or service

Question 8

Learning Curve

Answer 8

Graph that depicts the progression of unit costs as output increases. This curve innitialy declines but flattend out as the business approches diseconomies of scale

Question 9

Unit Pricing

Answer 9

Price chared for one unit of a good or service

Question 10

Umbrella Priceing Strategy

Answer 10

Market leaders set their prices just above the unit costs of the industry’s highest cost producers providing attractive rates of return for low-cost producers and modest returns for other competitors. This strategy allows market leaders to maintain their market share and grow profits as the market grows.

Question 11

Learning Curve Pricing Strategy

Answer 11

Low-cost producers use their cost advantages to regularly outprice the competition. This allows them to increase market penetration and creates bariers to entry for the industry.

Question 12

As demand for a particular good increases, the demand for a complimentary good should _______.

Answer 12

Increase

Question 13

Industries with __________ suppliers are more subject to price increases.

Answer 13

Limited

Question 14

6 Basic Competitive Models

Answer 14

Pure Competition, Monopolistic Competition, Oligopoly, Duopoly, Monopoly, Monopsony

Question 15

Pure Competition

Answer 15

Many producers of a commodity

Question 16

Monopolistic Competition

Answer 16

Many producers with small market share

Question 17

Oligopoly

Answer 17

Several large producers controlling 70-80% of the market share.

Ex: Automobiles, oil, and steel companies

Question 18

Duopoly

Answer 18

Two producers

Question 19

Monopoly

Answer 19

Single producer

Question 20

Monopsony

Answer 20

A single buyer in the market

Question 21

Most firms fall into the segment of _____________.

Answer 21

Monopolistic Competition

Question 22

Oligopolies typically form from barriers to entry created by….

Answer 22

Economies of Scale and/or Scope

Question 23

What is an example of a natural monopoly?

Answer 23

Water Utilities (typically granted by the government in exchange for strict regulation)

Question 24

The more __________ __________ an industry is, the greater its sensitivity to interest rates.

Answer 24

Capital Intensive

Question 25

Linear regression analysis is best used when relationships tend to trend _________ or ___________ one another

Answer 25

Together; Opposite

Question 26

Operating Leverage

Answer 26

The measuremnt of the degree to which a firm or project relies on fixed rather than variable costs.

Question 27

Financial Leverage

Answer 27

The degree to which an investor or business is utilizing borrowed money.

Question 28

The most common methods for inventory valuation are

Answer 28

FIFO and LIFO

Question 29

In a period of rising prices, ______ would result in a greater profit and tax expenses than ______ because a lower cost basis is used.

Answer 29

FIFO; LIFO

Question 30

___________ __________ represents the net ammount of a company’s liquid resources.

Answer 30

Working Capital

Question 31

Tangible Book Value

Answer 31

Total Assets - Intangibles - Total Liabilities

Question 32

The ususal par value for a preffered stock is _____

Answer 32

$100

Question 33

Form 8K

Answer 33

Form filed only when a significant or unusual material event occurs, such as a takeover or merger proposal.

Question 34

Proxy Statements

Answer 34

Filed when a corporation intends to solicit proxies from shareholders regarding issues (executive compensation and owenership percentage) to be voted on at a shareholder meeting.

Question 35

Form 13D

Answer 35

Filed by any person that acquires more than 5% of the equity issuer.

Question 36

EDGAR System stands for…

Answer 36

Electroninc Data Gathering Analysis, and Retrieval System