1. Investors who conduct industry analyses typically favor companies with strong market positions over companies with less secure market position because firms with strong market positions tend to

1. be price leaders. 2. benefit more from economies of scale. 3. have better R&D programs. 4. have lower production costs.

A. 2 and 4 only B. 1, 2 and 4 only C. 1, 2 and 3 only D. 1, 23 and 4

2. A company has annual sales of $160 million, a net profit margin of 4%, and total assets of $90 million. It carries $10 million in accounts receivable, $25 million in inventory, has $55 million in total debt, and 5 million shares of common stock outstanding. Based on this information, the company's return on equity (ROE) is

A. 4.4% B. 7.1% C. 11.5% D. 18.3%

3. A company has 2 million shares of common stock outstanding. Annual sales are $26 million. The net profit margin is 8% and the dividend payout ratio is 40%. Currently the stock trades at $17.68 per share. Given this information, the company has a P/E ratio of

A. 16 and a dividend yield of 2.35% B. 16 and a dividend yield of 3.20% C. 17 and a dividend yield of 2.35% D. 17 and a dividend yield of 3.20%

4. JJ Industries has a P/E ratio of 18 and an EPS of $0.93. This means that JJ's stock is currently selling for

A. $16.74 per share B. $17.07 per share C. $18.00 per share D. $19.35 per share

5. The PEG ratio

A. preferred by investors is equal to 2.0 or higher B. Compares the price/earnings ratio to the rate of growth of the company's earnings.

C. is a measure of a firm's liquidity D. measures the ability of a firm's assets to generate growth for the firm

6. Which of the following variables affect the P/E ratio?

1. capital structure of a firm 2. amount of dividends paid 3. inflation rate 4. earnings rate of growth

A. 1, 2 and 3 only B. 1, 2 and 4 only 4. 1, 3 and 4 only D. 1, 2, 3 and 4

7. Which of the following statements correctly recommendations based on behavioral finance?

1. Don't hesitate to sell a losing stock 2. Trade frequently 3. Chase performance 4. Be humble and open-minded

A. 1 and 2 only B. 1 and 4 only C. 2 and 3 only D. 3 and 4 only

8. Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 2.5%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?