The formula for calculating stock turnover is Sales/ Average stock Sales x Average stock Average stock / sales Sales x stock-sales ratio uestion 34 ( Long-term forecasts in volatile markets may be meaningless. TRUE FALSE Question 35 (1 Buyers use forecasts to answer all the following questions EXCEPT How much to purchase? Should new products be added? What price should be charged? Which media should be used to promote the product?

The formula for calculating stock turnover is Sales/ Average stock Sales x Average stock Average stock / sales Sales x stock-sales ratio uestion 34 ( Long-term forecasts in volatile markets may be meaningless. TRUE FALSE Question 35 (1 Buyers use forecasts to answer all the following questions EXCEPT How much to purchase? Should new products be added? What price should be charged? Which media should be used to promote the product?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 10 Which of the following does the concept of market efficiency imply? O 1. All shares have the same price O 2. Stock prices do not fluctuate O 3. Technical analysis encourages semi-strong form efficiency O 4. Fundamental analysis encourages semi-strong form efficiency
What will you do if your market does not develop as quickly as you predicted? What if your market develops too quickly?
1. The more optimistic investors are about a company’s future profits, the ________ the ratio of the company’s market value to book value.greaterlowerno effect on
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Consider two investment opportunities A and B. Investment A: Expected return = 0.08, Standard deviation = 0.06 Investment B: Expected return = 0.24, Standard deviation = 0.08 Which investment would you choose A or B? Provide the rationale behind your decision. b. If company is selecting projects with the negative NPV, what impact this decision would have on the share price of the company c. While forecasting future sales, internal sales forecast is more appropriate or external sales forecast? d. Why are dividends the basis for the valuation of common stock? e. When the constant growth dividend valuation model is used to explain a stock's current price, the quantity (ke - g) represents the expected dividend yield. Is this statement right or wrong? Explain.
II. Determine what form of the theory of efficient market is being described in each item. Write W for weak form, SE for semi-strong form, ST_ for strong form. _7. The fundamental analysis will not give new information in this form. 8. Both the fundamental and technical analysis will not give new information. 9. The stock pricess show historical information which may or may not include inside information. _10. The stodk prices already reflect all publicly available date such as any product, financial statement, etc.
28- Evidence on researching public information to identify mispriced companies shows that it is _______. Group of answer choices effective in earning abnormal returns in different market conditions effective as long as the market is semi-strong form efficient ineffective in weak-from market efficient ineffective as long as the market is semi-strong form efficient31- Based on the information in the table which of statements about total risk is correct? Stock Standard Deviation Beta W 37% 1.00 X 35% 1.50 Y 30% 0.85 Z 45% 1.30 Group of answer choices Stock Z has the greatest total risk because it has the largest standard deviation. . Stock X has the greatest total risk because it has the largest beta. Stock W because it has the greatest diversifiable risk. Stock Y has the lowest total risk because it has the lowest beta.
21. Examine the accompanying figure, which presents cu- mulative abnormal returns both before and after dates on which insiders buy or sell shares in their firms. How do you interpret this figure? What are we to make of the pattern of CARS before and after the event date? Cumulative Daily Average Prediction Errors (%) O 3 2 -1- -2- -200 -100 O 100 Event Day Relative to Insider Trading Day Sales Purchases 200 300
8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year. The risk-free rate (rRF) is 5.00%, the market risk Value Term premium (RPM) is 6.00%, and Portman's beta is 1.90. Dividends one year from now (D1) Horizon value (P1) Assuming that the market is in equilibrium, use the Intrinsic value of Portman's stock information…
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