Important questions about Equity Investments - Equity Investments Section 2. Equity Investments - Equity Investments Section 2 MCQ questions with answers. Equity Investments - Equity Investments Section 2 exam questions and answers for students and interviews.
1. As compared to public equity markets, operating in the private market:
A : offers management to better adopt a long-term focus.
B : offers stronger incentives to improve corporate governance.
C : allows more opportunities to raise capital.
2. The most likely candidates for a management buyout (MBO) are firms with:
A : low levels of cash flow.
B : high dividend payout ratios.
C : large amounts of undervalued assets.
3. A U.S. investor is looking for exposure to international stocks which trade
like common shares on the New York Stock Exchange. Such instruments
A : global registered shares.
B : global depository receipts.
C : American depository receipts.
4. Many countries impose restrictions on foreign individual and institutional
investors from investing in domestic companies. Which of the following is
least likely a reason for this restriction?
A : Restrictions help limit the amount of control foreign companies can exert
on domestic companies.
B : Restrictions make it easier for local companies to raise capital.
C : Restrictions lead to higher stability of capital markets.
5. Which of the following is most accurate with respect to Level II listed ADR?
A : They allow raising capital in U.S. markets through public offerings.
B : They have no size and earning requirements.
C : They have high listing fees.
46. Which of the following is not one of Porter’s five forces?
A : Bargaining power of customers.
B : Product/service substitution threats.
C : Technological influences
47. Industry competition is less intense and firm profitability is greater when
A : more rivalry among existing industry firms.
B : less bargaining power of customers.
C : more bargaining power of suppliers.
48. As an equity analyst, you are presented with the following statements about
two industries: i. Industry 1 has a few companies producing relatively homogenous
products; high income elasticity of demand; high capital costs and
investments in physical plants; rapid shifts in market shares of competing
firms; and minimum regulatory influence. ii. Industry 2 has a few companies with proprietary technologies,
differentiated products with unique features, high switching costs, and
minimum regulatory influence. Based on the information provided in these two statements, it is most
reasonable to conclude that compared to firms in Industry 1, those in
Industry 2 would potentially have:
A : larger economic profits.
B : over-capacity problems.
C : high bargaining power of customers.
49. Which of the following characteristics is most likely to be exhibited by
the industry that is experiencing intense competitive rivalry among
A : Customers basing purchase decisions largely on price.
B : Small number of suppliers with high bargaining power.
C : Substitute products available with low exit barriers.
50. Which of the following most accurately results in increased competition within an industry?
A : Option A in the above table.
B : Option B in the above table.
C : Option C in the above table.
51. With respect to competitive strategy, a company with a successful cost
leadership strategy is least likely:
A : to have efficient production systems.
B : to have a high cost of capital.
C : to have tight cost controls.
52. Which of the following industries is most likely to be characterized as
fragmented with strong pricing power?
A : Semiconductor equipment.
B : Private Banking.
C : Commercial printing.
53. Which of the following companies least likely has the greatest ability to
quickly increase its capacity?
A : Brokerage house.
B : Investment advisor.
C : Grocery store.
54. An industry with fierce competition and little or no differentiation in products
is most likely categorized as:
A : fragmented with weak pricing power.
B : concentrated with strong pricing power.
C : fragmented with strong pricing power.
55. According to the industry life-cycle model, an industry experiencing
industry consolidation, high barriers to entry and little or no growth is most
likely in its:
A : decline stage.
B : maturity stage.
C : shakeout stage.
56. Which of the following is most likely a characteristic of embryonic stage of an
A : Medium growth.
B : Low prices.
C : Insufficient volumes.
57. According to the industry life-cycle model, the growth phase is most likely
A : industry consolidation.
B : falling prices.
C : intense competition.
58. Which of the following industries can most likely be classified as cyclical?
A : Non-discretionary consumer goods industry.
B : Pharmaceutical industry.
C : Auto Industry.
59. Which of the following life-cycle phases is most likely categorized by intense
A : Shakeout.
B : Mature.
C : Growth.
60. In which of the following life-cycle phases are prices most likely to be high?
A : Mature.
B : Growth.
C : Embryonic.
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