Bloomberg Market Concepts: Equities and Economic Indicators
Here is the capital structure of Microsoft. What part of the $117.67 share price (to the nearest dollar) is represented by cash?
$17
Based on the data from the table, what if company A surprised the market and reported EPS of $4 per share and its projected P/E went down to 18. Assuming its current price did not change, would it be undervalued or overvalued and by approximately what percentage?
10% overvalued
Which quarter had the lowest inflation rate?
4
Based on the Bloomberg DDM screenshots below, which company is the most undervalued and which is the most overvalued on a percentage basis?
AT&T is the most undervalued and T-Mobile is the most overvalued
Based on the Bloomberg ECO calendar: If on 5/23, 670k actual US New Home Sales are reported, how should you evaluate this number?
Actual home sales higher, raise expectations for GDP growth
GDP per capita is a measure of prosperity because it divides the total GDP of a country by its population. Which of the below forecasts for a country would result in the largest decline in per capita GDP?
All else equal, a higher population growth will decrease the per capita GDP
A company operating in the fast-growing renewable sector is expected to announce its quarterly results soon. As an analyst, you have prepared financial projections for this company. What information would you primarily focus on when the company discloses its results to gauge how well it is performing?
Analyzing the discrepancy between the announced results and your estimates, considering the industry-specific drivers and market dynamics.
Based on the SPLC screenshot what can we imply about Apple's supply chain risk factors?
Apple's concentrated supply reliance on Hon Hai Precision is its largest supply chain risk factor.
If an unscrupulous analyst wants to manipulate the outcome of an absolute valuation, which part of the process would they most likely focus on?
Assumptions around discount rates and future cash flows
Why is the release of GDP statistics less interesting to investors than the release of other economic indicators?
Because GDP statistics are released well after other economic indicators
If a company goes bankrupt, how does the recovery process typically differ between bondholders and equity holders, and what impact does this have on their respective investment risks?
Bondholders have first claim on assets, reducing their investment risk compared to equity holders.
A person who is risk-averse is more likely to invest in
Bonds, because they offer known fixed repayments
What does the release of earnings announcements have in common with the release of economic indicators?
Both are scheduled in advance
Which country or countries are forecasted to avoid a recession in the upcoming year?
C & D
Based on the MOV screenshot taken on 7/19/2023 which stock is contributing the most to the SPX index?
CRM
Which of TGT's peers would you consider the most undervalued analyzing its BF P/E ratio from a relative value perspective?
Canadian Tire
Assume expected inflation is 4% per year. Which company would give you the highest expected return?
Company C's stock price is expected to rise 8% per year plus the rate of inflation while not paying any dividend
In the Unite States, why is there a strong relationship between unemployment and GDP?
Consumer spending accounts for two-thirds of the U.S. economy when the number of unemployed consumers rises, there is less consumer spending.
How might the Efficient Market Hypothesis (EMH) explain the immediate fluctuation of a company's stock price following an earnings report release?
EMH suggests that the stock price should only respond to the earnings report if it contains unexpected information
How does the potential for losses in bond investments differ from that of equity investments in the event of a company's bankruptcy?
Equity holders usually lose more as bond holders have more rights to collateral
Please answer the following question based on the provided Bloomberg Economic Forecast (ECFC) screen. Which of the following descriptions accurately represents the forecast for China's Real GDP?
Expected to rise then decelerate
Which of the following economic indicators has the most detailed economic information?
GDP
Consider the formula: GDP = C + I + G + (X - M) A country has 10 billion increase in imports, with a corresponding 7 billion in exports. Assuming nothing else has changed, what has happened to GDP?
GDP declined by 3 billion
Which of the following statements best describes government incentives regarding GDP reporting?
Governments usually have an incentive to raise GDP growth to boost job growth and help their re-election chances
Based on the attached article, what could be inferred about the impact of stock price changes on Apple's buyback strategy?
Higher stock prices in 3Q could have resulted in fewer buybacks, hence the slight disappointment
Which description most accurately reflects the history and forecast of US net exports, based on the actual and forecast data in the ECFC function?
Historically, the United States has been a net importer, and this trend has been worsening through 2022. However, the forecasts for 2023 and 2024 indicate that this trend will now reverse.
Which of the following drives "multiple expansion" in a stock?
Increasing the P/E ratio with higher earnings
Based on the attached SPX GICS Sector table from the WEI function below, which sector contributed the largest daily decrease to the SPX Index at this time?
Information Technology
What is the significance of the financial leverage Jenny benefited from in her house purchase?
It amplified the impact of her income changes on her discretionary income
What role does beta play in absolute valuation?
It determines how risky a stock is in comparison to the overall stock market
Based on the GDP components in the ECST screen below, what can we conclude about personal consumption expenditures from Q1 2022 through Q1 2023?
It has remained the largest contributor representing over 70% of total U.S. real GDP
How did low U.S. interest rates from 2008 to 2015 affect the S&P 500?
It tripled
Which of McDonald's peers offers the best relative value based on P/E FY1?
Jack in the Box
Based on the EQRV screen, what best describes our relative value analysis of MCD using only its current BF (blended forward) P/E ratio versus its own historical 2-year average BF P/E ratio?
MCD has a relatively low current BF P/E ratio, so it relatively undervalued versus itself
Based on the attached figures, doing a relative value analysis between MSFT and AAPL which company is relatively cheaper?
MSFT is relatively more expensive on a P/E basis and has higher Dividend yield making it relatively cheaper on a dividend yield basis
Which company is worth more, Chipotle or McDonald's?
McDonald's because it has higher market capitalization
How have economic forecasts for this country evolved as shown in the chart below?
Minimal change
Based on the two TRA screenshots below, what can we infer about he effects of additional returns from reinvesting dividends in the INDU versus the CCMP indices over this 5-year period?
Reinvesting Dividends have a much greater effect in the INDU index because it is composed of much higher dividend paying stocks than the CCMP index.
Which country has the lowest forecasted Real GDP growth for 2025?
Russia
When conducting financial analysis for a fertilizer manufacturing company, which socio-economic trend should be factored into your financial model?
Shifts in demographics and dietary preferences in emerging markets can lead to an increased demand for meat, which subsequently increased demand for animal feed and fertilizers
How should we evaluate TGT compared to Dollar General Corp analyzing their BF P/E ratio from a relative value and historical average perspective?
TGT and Dollar General have almost the same P/E multiples, but Dollar General is considered more undervalued when comparing its P/E discount from a historical perspective
Which answer most accurately describes the pattern of TSLA earnings report history and its market price reaction?
TSLA almost always beats its earnings forecast but there is no predictable price pattern following the report.
Based on the time of the attached graphs, which company has a higher gross profit and why?
TSLA currently has a higher gross profit because even though it has lower current revenue than F. TSLA's cost of revenue is much lover than F.
What makes the stock market more appealing than the bond market for some investors?
The opportunity to earn a huge return
What happens to the residual cash flows for equity holders if a company's revenue decreases but its fixed costs remain the same?
The residual cash flows for equity holders decrease
An equity analyst accurately predicted a positive surprise in a company's quarterly results. What is the most likely reaction of its share price?
The share prices will most likely go up, but it is not guaranteed
What were the biggest recent surprises in the Housing and Real Estate Market?
The side panel shows NAHB Housing Market Index and Pending Home Sales were the only positive surprises
Why is it difficult to compare the valuation of Rolls-Royce and GE's aircraft engine businesses?
They don't publish P/E ratios for their aircraft engine businesses
What is the best-case scenario for a bond investor who holds a bond to maturity?
They receive their original investment back plus an amount equal to the yield each year
How do companies usually list on the stock exchange?
Through Initial Public Offerings (IPOs)
Here is a table from the BI COPPG dashboard which shows the different end-uses of Copper. Which of the following Bloomberg headlines would have the least importance to a Copper trader?
U.S. computer industry
Based on the chart, which answer best describes CPI numbers in terms of economic conditions?
We had inflation about 6% above the desired target rate in 2022, with the rate expected to decline over the next two years but remain above the target line
Based on the WCRS screenshot below, if at the end of 2013 you had invested an equal weighted portion of $100,000 in NVIDIA and nine other companies that went bankrupt, how would your performance compare to the SPX return at this time, and what does this imply about the nature of stock market returns?
You would have outperformed the SPX by over 1000%. This demonstrates the positive asymmetry of stock market returns
Which valuation method is derived from the profit generated by the company?
absolute valuation
What additional risk is reflected when discounting a firm's future cash flows as opposed to using government bond yields?
firm-specific risk
Considering the details on company listings, which of the following is NOT a valid reason for a company to delist from a stock exchange?
the company's owners wish to pursue other business interests
