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CFP EXAM - Giauque Flashcards > IP - Chapter 10 - Equity Securities Analysis* > Flashcards

IP - Chapter 10 - Equity Securities Analysis* Flashcards

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1
Q

Two approaches to fundamental analysis of equity securities?

A

Bottom up approach

Top Down Approach

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2
Q

How does the bottom-up approach analyze an equity security?

A

1) Company
2) Industry
3) Economy

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3
Q

How does the top-down approach analyze an equity security?

A

1) Economy
2) Industry
3) Company

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4
Q

Most important variables to consider of economic analysis when evaluating equity securities?

A

1) GDP
2) Inflation
3) Interest Rates
4) Unemployment

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5
Q

What is the fundamental analysis equity securities approach favored by analysts?

A

Top Down Approach

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6
Q

Expresses general levels of price changes in the economy?

A

Inflation Rate

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7
Q

Basket of consumer goods is represented by what?

A

CPI

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8
Q

What are the 3 primary goals of the FED?

A

1) Maintain long term economic growth
2) Maintain Price Levels
3) Maintain full Employment

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9
Q

What kind of policy does the Federal Reserve implement?

A

Monetary Policy

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10
Q

What are the tools utilized by the Federal Reserve to implement monetary policy?

A

1) Reserve Requirement
2) Discount Rate/Fed funds rate
3) Open Market Operations
4) Excess Reserve Deposits

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11
Q

What is the percentage reserve requirement for banks?

A

10%

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12
Q

The interest rate that the Fed charges financial institutions for short term loans?

A

Discount Rate

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13
Q

How much higher is the discount rate or federal LENDING rate than banks charge each other to borrow?

A

1% Higher

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14
Q

This is also called the bank to bank lending rate

A

Federal Funds Rate

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15
Q

They selling and buying of U.S. Treasuries by the Federal Reserve?

A

Open market operations

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16
Q

What happens when the Federal reserve is tightening policy?

A

The SELLING of US Treasuries

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17
Q

What happens when the Federal reserve is loosening policy?

A

The buying of US Treasuries by the Federal Reserve

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18
Q

The Federal Reserve pays interest to banks for keeping an ____________________ .

A

Excess Reserve

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19
Q

Reserves above or in excess to the minimum requirement of deposits held with the Federal reserve.

A

Excess Reserve

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20
Q

If the Fed wants to “tighten” what will happen to the interest rate that they pay for excess reserves?

A

Interest Rate will increase (ties more money up)

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21
Q

What type of policy does Congress utilize?

A

Fiscal Policy

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22
Q

What are the 3 ways Congress implements Fiscal Policy?

A

1) Taxes
2) Government Spending
3) Deficit Management

23
Q

What are the 3 goals of Congress when utilizing Fiscal policy?

A

1) Maintain price levels
2) Maintain employment
3) Maintain long term economic (GDP) growth

(Same as Federal Reserves goals)

24
Q

What are the 5 stages of an industry life-cycle?

A

1) Pioneering Development
2) Rapid Growth
3) Mature Growth
4) Market Maturity
5) Market Decline

25
Q

Porters 5 competitive forces?

A

1) Rivalry
2) New Entrants
3) Threat of substitutes
4) Bargaining Buyers
5) Bargaining Sellers

26
Q

What is the current ratio?

A

Current Assets / Current Liabilities

27
Q

What is the quick ratio or acid test ratio?

A

(Current Assets - Inventories) / Current Liabilities

28
Q

What is the debt ratio?

A

Total Debt / Total Assets

29
Q

Formula for Gross profit margin?

A

(Sales - COGS) / Sales

30
Q

This profitability ratio considers costs of goods sold but not other costs.

A

Gross Profit Margin

31
Q

What is the formula for profit margin?

A

Net Income / Sales

32
Q

This profitability ratio is the percent of each sale resulting in net income

A

Profit Margin

33
Q

Return on equity formula?

A

Net Income / Equity

34
Q

What 3 formulas make up Return on Equity?

A

Profit Margin, Asset Turnover, Financial Leverage

35
Q

Measures the number of advancing stocks versus the number of declining stocks

A

Market Breadth

36
Q

How is the payout ratio calculated?

A

Dividends per share / Earnings per share

37
Q

An advancing stock is one that ________________________ .

A

Closes higher than the previous days close.

38
Q

A declining stock is one that __________________________________ .

A

Closes lower than the previous day close

39
Q

Described as arithmetic mean of stock prices, 10 prices used to calculate the average, shows less volatility than a series of prices

A

Moving Average

40
Q

These ratios measure coverage of short term liabilities

A

Liquidity Ratios

41
Q

These types of ratios measure efficiency

A

Asset Management Ratios

42
Q

These types of ratios measure long term solvency

A

Leverage Ratios

43
Q

These types of ratios measure the ability of a firm to generate earnings

A

Profitability Ratios

44
Q

The method of disaggregating ROE into three basic components: profit margin, asset turnover, and financial leverage.

A

DuPont Formula

45
Q

Profit margin formula

A

Net Income / Sales

46
Q

Asset Turnover Formula

A

Sales / Total Assets

47
Q

Financial Leverage Formula

A

Assets / Equity

48
Q

Technical analysis is driven by …

A

Supply and Demand

49
Q

The process of using publicly available information regarding a financial securities cash flows to estimate the intrinsic value of the security

A

Fundamental Analysis

50
Q

What are two important liquidity ratios?

A

Current Ratio and Quick Ratio

51
Q

The degree of ________________ measures the sensitivity of a firm to change in operating income on earnings per share.

A

Financial Leverage

52
Q

The degree of _______________ is a combination of the degrees of operating and financial leverage.

A

Total Leverage

53
Q

The degree of _______________ measures the sensitivity of a firm to changes in sales and operating income.

A

Operating Leverage

CFP EXAM - Giauque Flashcards (21 decks)

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