Bloomberg Market Concepts Certification

This chart shows a scatterplot with the x-axis being the estimated sales growth and the y-axis being the estimated P/E multiple....

Chubb

You buy the stock of four consumer goods companies in March 2014 and hold them for five years until March 2019. Here are the TRA charts from Bloomberg for all four stocks. The "Buy Price" in the top left-hand corner is the price you paid for each stock. The price of the stock in March 2019 is noted in the chart's legend. The legend also states the Dividend Adjusted Value of the stock in March 2019, which is the value of the stock including reinvested dividends over the holding period. For which stock did the bull of the total return come from dividends?

Colgate-Palmolive

Here is a chart of the Nasdaq Composite, the world's main technology index. It peaked in the dotcom bubble on March 10, 2000. The P/E....

Earnings grew substantially, meaning that the P/E ratio in early 2015 was only around 30.3x.

Which of the following statements is true?

When you buy an equity, the most you can lose is 100% and your potential gain is unlimited.

The World Equity index function shown contains two valuation metrics for the S&P 500. The Verizon description page...

Verizon is less expensive than the S&P 500 on both a P/E and dividend yield basis.

Assume that an investor in the S&P 500 reinvests his dividends. According to the chart, what approximate return would this investor have reaped from the early 2009 (1,000) trough to the endpoint (3,400)?

340%

On the chart below, if the EPS grew from 7.61 on 12/31/2018 to 7.82 on 6/30/2019, what would the implied earnings yield be?

4.1%

The number at the bottom right of each supplier's box shows the portion of Boeing's total costs in the last year that went to that supplier...

60.68%

Engines are the most expensive, heavy component on an aircraft and are designed with detailed specifications. Which of the following would likely be the best theme for a Rolls-Royce analyst research note to help a portfolio manager decide between investing in Rolls-Royce or United Technologies?

A comparison of the commercial prospects of new aircraft models

What does the release of earnings announcements have in common with the release of economic indicators?

Both are scheduled in advance.

Here is a table from the Bloomberg Intelligence copper dashboard which shows the different end-uses of aluminum in China. Which of the following headlines would be of most interest to an aluminum trader in China?

China's Aluminum Demand Weathers Real-Estate Slowdown So Far

Company A pays a dividend of 2%. Company B's stock price increases by 1% plus the inflation rate every year. Company C pays 3% dividends, and its stock price decreases every year by 2%. Company D pays 0% dividends, and its stock price does not increase year over year. If the companies are otherwise identical, which would you invest in?

Company B

When an analyst is looking at a company for the first time, which of the following four activities does he do first?

Defines the industry or industries in which the company operates

How is enterprise value calculated?

Enterprise value = market cap - cash + debt

What is the prime reason that Jenny's discretionary income is more volatile than her salary?

Her mortgage payments and necessities are fixed.

Why do companies do IPOs?

IPOs incentivize entrepreneurs to innovate as IPOs provide a way for entrepreneurs to monetize their work.

Masco is a consumer discretionary company that focuses on home improvement products. Here is a breakdown of the revenue concentration by industry. Which of the following headlines would be of the most interest to potential investors?

Kitchen and Bathroom Remodeling is up More Than 8% as Homeowners Look to Improve House Values

Which of the following is most likely to be the most challenging part of this first step of the absolute valuation process?

Making the assumptions upon which to project future performance

Which company is worth less, Coca-Cola or Pepsi?

Pepsi because it has a lower market cap

Widget Co has a market capitalization of $125 million. it does a 5-for-1 stock split. it then does a 1-for-25 reverse stock split. Finally, it does a 35-for-1 stock split. Nothing else changes. what's the new market cap?

$125 mn

What may be a problem of comparing the P/E of a stock to the P/E of the overall market?

A stock's P/E ratio can remain above or below market average for extended periods.

Why do company manager-owners smile when they ring the stock exchange bell at their IPO?

An IPO reveals the value of the manager-owners' stake.

Why are equities volatile?

Due to the residual nature of earnings

What is a reason one discounts future cash flows as part of the absolute valuation process?

Investors prefer cash flows today to cash flows in the future.

What role does beta play in absolute valuation?

It determines how risky a stock is in comparison to the overall stock market

Which company is most exposed to the ups and downs of the aircraft engine industry?

MTU Aero Engines

What are the possible weaknesses of this peer approach to valuation?

The chosen peers might not be true competitors, the company might have multiple divisions, and the most appropriate competitors might not have P/E multiples.

At its peak at the end of 1999, Microsoft has a market cap of $600B. PC sales were booming and most PCs ran on Microsoft software.....

The decline in the P/E ratio more than offset earnings growth and this pushed the market cap down.

Below is a table for the steel producers Dashboard, which shows the sources of demand for steel products globally. Given the data, which of the following would be of most interest to prospective investors in steel?

The impact of China's recession on the commercial real estate market

You are an analyst for a home-building company tasked with creating a financial model of home-building trends. Which of the following factors should your model address?

The price of wood products and long-term interest rates

Company X was expected to have earnings per share of $0.52 for the upcoming quarter. On the day of the results, the company reported earnings per share of $0.83. What happened to the share price when the stock market opened?

There is not enough information to tell.

A luxury cell phone maker has a high fixed-cost base and a lot of debt. Which stakeholder in the company would you rather be?

a shareholder in a booming economy

What would the approximate return be on the S&P 500 from the trough of March 2009 (680) to the end of 2013 (1,848), ignoring dividends?

170%

What input do both absolute valuation and relative valuation typically require?

short-term forecasts

In 1999, James Glassman and Kevin Hassett published a book called "Dow 36,000". At the time, the Dow Jones Industrial Average Index was just under 12,000. Which of the following is a potential substitute for the book title?

"The Sum of the Share Prices of All 30 Dow Jones Members Will Triple"

If the earnings per share of a company is $3.85 and the earnings yield is 2.5%, what is the price per share?

$154

Here is the capital structure of Microsoft. What part of the $117.67 share price (to the nearest dollar) is represented by cash?

$17