Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis – I - Question Paper

I. Numerous or equally balanced competitors.

II. High growth rate of the industry.

III. High fixed cost.

IV. Presence of differentiation or switching costs.

(a) Only (I) above (b) Only (II) above

(c) Both (I) and (III) above (d) Both (III) and (IV) above

(e) (II), (III) and (IV) above.
< ans >

11.
Which of the subsequent will reason an increase in the quick ratio?

(a) Negotiating a 10% reduction on an outstanding balance owed to a supplier

(b) Restating inventory at LIFO (in an industry where raw material costs rise over time)

(c) Paying off long-term debt

(d) Persuading a customer to pay their invoices earlier

(e) Increase in cash credit limit by 20%.
< ans >

12.
Which of the subsequent is actual for companies that capitalize costs instead of expensing them?

(a) Lower asset levels and Lower equity levels

(b) Higher asset levels and higher equity levels

(c) Higher asset levels and lower equity levels

(d) Lower asset levels and higher equity levels

(e) Higher equity level and no change in asset level.
< ans >

13.
Consider the subsequent data for a stock:

Current abnormal growth rate
=
8%

Normal growth rate
=
4%

Current dividend per share
=
Rs.3.00

needed rate of return
=
12.5%


If the time period during which the current abnormal growth rate will become normal growth rate is six years, the premium on the stock due to abnormal growth rate is

(a) Rs.1.41 (b) Rs.4.24 (c) Rs.8.26 (d) Rs.9.21 (e) Rs.12.52.
< ans >

14.
Which of the subsequent statements is/are actual with respect to PEG ratio?

I. If the PEG ratio is less than one, it is a sign of possibly undervalued stock or the market does not expect the company to achieve the earnings growth that is reflected in the market estimates.

Earning:   Approval pending.