Quiz 2 - Lecture questions and answers PDF

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Principles of Stock Picking

Pre-Lecture 2 Quiz Study Guide Qu e s t i o n s F r omT h i s Ar e a

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I n v e s t o p e d i a-F u n d a me n t a l An a l y s i s , Se c t i o n s1 4

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1 . Ac c o r d i n gt ot h el e c t u r e , wh i c hwe b s i t ei st h emo s t u s e f u l f o r l e a r n i n ga b o u t b a s i cfi n a n c i a l p r i n c i p l e ss u c ha sd e fi n i t i o n s ?An s–I n v e s t o p e d i a . 2 . Wh i c ho f t h ef o l l o wi n gh a sb e e nf o u n dt ob et h eb e s t i n d i c a t o ro f t h el o n gt e r md i r e c t i o no f t h e s t o c kma r k e t ?An s-c o r p o r a t ee a r n i n g sg r o wt h 3 . Ba s e do nt h es l i d e" St o c kPi c k e r "Ca r e e r s , wh e nc o mp a r e dt oap r o f e s s i o n a l t r a d e r , a ne q u i t y r e s e a r c ha n a l y s t t y p i c a l l y ?An ss h o u l dc o n d u c t i n d e p e n d e n t r e s e a r c hmo r el o n gt e r m. 4 .“ Bu y s i d e ”fi r ms( HI NT : Re v i e wt h ec l a s ss l i d et i t l e d" I n v e s t me n t Fi r ms " ) : An sI n v e s t c l i e n t a s s e t smu t u a l , p e n s i o na n dh e d g ef u n d s . 5 . Th i sd e s c r i b e st h emu l t i y e a rt r e n dwi t h i nt h emo n e y ma n a g e me n t i n d u s t r y( HI NT : s e et h es l i d e " Wo r t h yo f An a l y s i s ” ) : An sUSDo me s t i ce q u i t ymu t u a l f u n da n de t f s–a c t i v ea n dp a s s i v e 6 . Wh a t d ot h et woEsi nt h eENTER™ f r a me wo r ks t a n df o r ? An se x p e c t a t i o n a l a n de x a mi n a b l e 7 . Ac c o r d i n gt ot h ea r t i c l ef r o mI n v e s t o p e d i ao nf u n d a me n t a l a n a l y s i s , wh yd of u n d a me n t a l a n a l y s t s l o o ka t t h efi n a n c i a l a s p e c t so f ac o mp a n y ?An sg a i n si n s i g h t o nac o mp a n yf u t u r ep e r f o r ma n c e . r e v e n u e sa n di n t r i n s i cv a l u e s 8 . Ac c o r d i n gt ot h ea r t i c l ef r o mI n v e s t o p e d i ao nf u n d a me n t a l a n a l y s i s , wh a t t y p e so f a n a l y s e sa r e t y p i c a l l yd o n eo na l l c o mp a n i e s : An sQu a l i t a t i v ea n dq u a n t i t a t i v e . -fi n a n c i a l a n a l y s i s 9 . Ac c o r d i n gt ot h ea r t i c l ef r o mI n v e s t o p e d i ao nf u n d a me n t a l a n a l y s i s , i f as t o c ki st r a d i n ga t $ 2 0 , b u t y o u ra n a l y s i sc o n c l u d e si t s h o u l db et r a d i n gn e a r$ 2 5 , y o uwo u l db es a y i n gt h es t o c kh a sa h i g h e r : An sI n t r i n s i cVa l u e/ i n v e s t me n to p p o r t u n i t y . 1 0 .Ac c o r d i n gt ot h ea r t i c l ef r o mI n v e s t o p e d i ao nf u n d a me n t a l a n a l y s i s , wh i c hi sa na r e at or e s e a r c h wh e nc o n d u c t i n gi n d u s t r ya n a l y s i s ?An sFi n a n c i a l St a t e me n t s–c u s t o me r sma r k e t s h a r e s r e g u l a t i o n sc o mp e t i t i o n s . 1 1Ac c o r d i n gt op a g e8 0o f Be s t Pr a c t i c e sf o rEq u i t yRe s e a r c h , BEF OREe v e ns t a r t i n gCOMP ANYl e v e l a n a l y s i s , i t i si mp o r t a n t t o : An sDe v e l o pas t r a t e g i cv i e wa b o u t i n d u s t r yfi r s t , g e t t h r o u g hs e c t o r a n a l y s i sfi r s t .

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1 2 Ac c o r d i n gt oCh a p t e r7o f t h eb o o k , wh i c hi sn o t a mo n gt h eu s e f u l me t h o d sf o rs e c t o r a n a l y s i s( HI NT : Wh i c hi sn o t as e c t i o ni nt h ec h a p t e r ) ?An sh i s t o r i c a l a n a l y s i so f fi n a n c i a l ma t r i x , d e ma n da n dc a p a c i t ya n a l y s i s , f o o dc h a i na n a l y s i s , s e c t o rl e v e l s t o c kp e r f o r ma n c e 1 3Ac c o r d i n gt oCh a p t e r 7o f t h eb o o k , o v e r t h el o n g t e r m, i n d u s t r ys u p p l yt e n d st o_ _ _ _ _ _ _ _ d e ma n do f e n dma r k e t sAn sma t c h 1 4Ac c o r d i n gt op a g e8 2o f Be s t Pr a c t i c e sf o rEq u i t yRe s e a r c h , ASPs t a n d sf o r : An sa v e r a g es a l e s p r i c e 1 5Ac c o r d i n gt op a g e8 8o f Be s t Pr a c t i c e sf o rEq u i t yRe s e a r c h , af o o dc h a i na n a l y s i si sad i a g r a m s h o wi n g: An sAma po f a l l s u p p l i e r sa n dv e n d o r sr e q u i r e df o ry o u rc o mp a n yt oc r e a t ei t sp r o d u c t o r s e r v i c e . 1 6Wh e ni t c o me st oc r e a t i n gafi n a n c i a l mo d e l f o rac o mp a n y( HI NT : h o wmu c ht i me / e ff o r t s h o u l db e d e v o t e d ) : An s1 0 -5 0h o u r s , d o n ’ t o v e r d u ei t , 1 7Ana n a l y s t ’ sfi n a n c i a l mo d e l s h o u l d( HI NT : Wh a t i st h ep u r p o s eo f t h emo d e l ? ) : An sI d e n t i f ywh e n the market is wrong about a stock/ spot future catalyst not recognized by the wall street. 1 8T y p i c a l l y , h o wma n yc r i t i c a l f a c t o r ss h o u l da na n a l y s t f o c u so nwh e nb u i l d i n gamo d e l : An s2 4

1 9Wh a t wa st h ef r a me wo r kd i s c u s s e dt h a t c o v e r st h e“ e l e me n t so f ag o o dc o mp a n ymo d e l ” ? An sAEIOU: Accurate, Efficient, Illuminating, Organized, Useful Pa g e1o f 2

6 e a e c c 2 5 f 2 4 7 e b 0 3 8 a a 3 4 f c 4 d 5 9 2 c f 6 a . d o c x

Principles of Stock Picking Qu e s t i o

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2 0 Ac c o r d i n gt ot h ec h a p t e r o nmo d e l i n g( Ch a p t e r1 7 ) , wh e ni t c o me st omo d e l b u i l d i n g , wh i c h i s / a r ey o u rwo r s t e n e my ( i e s ) : An sc o mp l e x i t y 2 1 Wh e nb u i l d i n gafi n a n c i a l f o r e c a s t f o rac o mp a n y , i t ’ sab e s t p r a c t i c et o : An s

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6 e a e c c 2 5 f 2 4 7 e b 0 3 8 a a 3 4 f c 4 d 5 9 2 c f 6 a . d o c x...