Introduction to investment analysis

Financial analysis only refers to the analysis of financial statements.

False

The primary objective of internal financial analysis is to maximize stockholders' wealth.

True

Investment analysis is concerned mainly with real assets like factories and equipment.

False

Valuation of financial instruments is part of external financial analysis.

True

Real investments are typically analyzed using methods like portfolio theory and CAPM.

False

Modern financial analysis focuses primarily on value creation and management.

True

Benjamin Graham believed investors should always follow market trends.

False

Mr. Market represents rational investor behavior in efficient markets.

False

Which of the following is NOT a goal of financial analysis?

A. Setting financial policy

B. Making HR hiring decisions

C. Identifying investment opportunities

D. Building long-term business plans

B

Internal financial analysis focuses on all EXCEPT:

A. Capital budgeting

B. Stockholder wealth maximization

C. Managing portfolio investments

D. CFO perspective

C

External financial analysis includes:

A. Real investments

B. Portfolio management

C. Capital structure planning

D. Cash budgeting

B

Which of the following are valuation techniques? (Select all that apply)

A. Economic value

B. Comparable value

C. Option valuation

D. Historical cost

A, B, C

Economic value is determined by:

A. Book value and depreciation

B. Present value of expected cash flows

C. Past stock prices

D. Balance sheet totals

B

Which concept best describes investor return expectations based on perceived risk?

A. Cash accounting

B. Discounted dividend model

C. Risk-adjusted discount rate

v

C

The quote 'I can calculate the motion of heavenly bodies, but not the madness of people' refers to:

A. Efficient markets

B. Behavioural finance

C. South Sea Bubble

D. Both B and C

D

Benjamin Grahams character 'Mr. Market' is used to illustrate:

A. Predictable market behavior

B. Efficient capital markets

C. The irrationality of investor sentiment

D. Rational choice theory

C

Fundamental analysis is based on:

A. Market trends and technical indicators

B. Analysis of intrinsic value through financial and economic data

C. Behavioral patterns in traders

D. Random walk hypothesis

B

What are examples of financial instruments analyzed in external analysis? (Select all that apply)

A. Bonds

B. Derivatives

C. Machinery

D. Stocks

A, B, D