Q. Which of the following questions can be answered by using accounting ratio analysis?

1. What is the company's cash balance?
2. What is the company's current market share?
3. How much profit is the company generating from its assets?

Q. A decrease in inventories contributes to cash flow from which activity?

1. Investing
2. Financing
3. Operating

Q. Analysts who build statistical models to identify stocks that are likely to outperform are best described as:

1. technical analysts.
2. quantitative analysts.
3. fundamental analysts.

Q. An objective of risk management is to:

1. maximise returns for shareholders.
2. eliminate risk associated with investments.
3. identify potential threats facing a company.

Q. The risk, also known as Herstatt risk, that the counterparty fails to complete its side of the deal as agreed is commonly referred to as:

1. liquidity risk.
2. settlement risk.
3. compliance risk.

Q. An investor buys equity in a company with a major portion of its operations in the exploration, production, and processing of oil. The investor is purchasing:

1. an oil derivative.
2. a physical commodity.
3. a commodity-related stock.

Q. Using a value at risk (VaR) model based on historical data to forecast future expected losses works well:

1. all the time.
2. during times of normal market conditions.
3. during times of increased market volatility.

Q. A company is operating below capacity. What is the most likely result when production rises?

1. The fixed cost per unit will decrease.
2. The variable cost per unit will increase.
3. The total cost per unit remains constant.

Q. According to the discounted cash flow method, the value of a bond equals the sum of the:

1. present values of the expected coupon payments.
2. expected coupon payments and final principal payment.
3. present values of the expected coupon payments and the final principal payment.