Question
1. Financial statement analysis should be included in investment analysis because a. A firm's business conditions can be compared with similar firms to determine whether
1. Financial statement analysis should be included in investment analysis because
a. A firm's business conditions can be compared with similar firms to determine whether its current operations are average or above or below average.
b. We can predict earnings and dividends by forecasting the future financial conditions.
c. We can use the accounting statements and information regarding current and forecasted business conditions to form expectations regarding the risk of the firm's future operations.
d. Only a and b are valid reasons. e. a, b and c are all valid reasons.
2. If the stock market is semi-strong efficient, which of the following statements is correct?
a. All stocks should have the same expected returns; however, they may have different realized returns.
b. In equilibrium, stocks and bonds should have the same expected returns.
c. Investors can outperform the market if they have access to information which has not yet been publicly revealed.
d. If the stock market has been performing strongly over the past several months, stock prices are more likely to decline than increase over the next several months.
e. None of the above statements is correct.
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