FIN 3120 Bloomberg questions

if the earnings per share of a company are $1 and the earnings yield is 2% what is the price per share?

$50

Widget CO has a market capitalization of $100M. It does a 10-for-1 stock split. it then does a 1-for-16 reverse stock split. Finally, it does a 35-for-1 stock split. Nothing else changes. Whats the new market cap?

$100M

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

An IPO crystalizes the value of the manager-owners stake

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

There isn't enough info to tell

what input do both absolute valuation and relative valuation typically require? a)long term forecasts b)short term forecasts c)historic revenue data d)historic earnings data

b) short term forecasts

what is one possible weakness of this peer approach to valuation? a) it is a very laborious approach to valuation b) the estimated growth can be dramatically wrong c) it only focuses on the statistics of one company d) it doesn't account for industry context

b) the estimated growth can be dramatically wrong

which of the following statements is true? a) when you buy an equity, your potential loss is unlimited and your maximum potential gain is 100% b) when you buy an equity, your potential loss is 100% and your maximum potential gain is unlimited c)when you buy an equity, you are promised a stream of fixed dividends

b) when you buy an equity, your potential loss is 100% and your maximum potential gain is unlimited

How do earnings yields differ from bond yields?

the cash flow from equities can continue indefinitely while the cash flow from most bonds comes to an end

Why are equities so volatile

Due to the residual nature of earnings

What is the prime reason that Jennys 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

A wedding planning company has a high fixed cost base and a lot of debt. Who would you rather be? a) a shareholder in a booming economy b) a shareholder in a stagnant economy c) a bond holder in a booming economy d) a bond holder in a stagnant economy

a) a shareholder in a booming economy

when an analyst is looking at a company for the first time, which of the following four activities does he do first? a) defines the industries in which the company operates b) sizes the market in which the company sells c) Calculates the companys market share d) estimates the breakdown of the companys cost base

a) defines the industries in which the company operates

what is a reason one discounts future cash flows as part of the absolute valuation process a) future profits are uncertain b)deflation makes future cash flows worthless c) investors prefer future payments to payments today

a) future profits are uncertain

You are building a financial model of a bifocal lens manufacturer. Which of the following is the best driver to use? a) median age of society b) mean museum visits per capita per year c) mean cruise sales per household per year d) total number of bridge and mah jong players

a) median age of society

What does the release of earnings announcements have in common with the release of economic indicators? a) Both are typically released on a quarterly basis. b) both are typically published by corporations c) both are estimated in advance by analysts

c) both are estimated in advance by analysts

a rise in which of the following inputs will increase an absolute valuation? a) number of shares b) beta c) earning estimates d) 10-year government bond yield

c) earning estimates

which of the following assigns the same relative weightings to short-term and long-term outcomes as the absolute valuation process? a) a student deciding to attend medical school b) a yoga instructor avoiding junk food c) a government giving tax break on electric car purchases d) a fishery exceeding fishing quotas

d) a fishery exceeding fishing quotas

What may be a problem of comparing the P/E of a stock to the P/E of the overall market? a) the overall market may not bed sufficiently broad for the purpose of comparison b) given the number of stocks in the overall market, it is very time consuming to calculate P/E of the market c) most stock market indices exclude the effect of dividends d) a stocks P/E ratio can remain above or below market average for extended periods

d) a stocks P/E ratio can remain above or below market average for extended periods

which of the following is most likely to be the most challenging part of this first step of absolute valuation process? a) making the assumptions upon which to project future performance b) conducting the necessary mathematics c)locating the required historic data within company releases and earnings statements

a) making the assumptions upon which to project future performance

how is enterprise value calculated? a)market cap + cash - debt b)market cap - cash + debt c) market cap + cash + debt

b)market cap - cash + debt