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Multiple Choice Quiz
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1
At what stage of the industry life cycle would a company face an influx of competition?
A)Start-up stage
B)Consolidation stage
C)Maturity stage
D)Stage of relative decline
2
An example of a defensive industry is ______________.
A)Food producers
B)Auto manufacturers
C)Both A and B are examples
D)Neither A nor B is an example
3
Companies in the maturity stage of the industry life cycle are sometimes referred to as ______________.
A)falling stars
B)bargains
C)turnarounds
D)cash cows
4
Which of the following affects the sensitivity of a firm's earnings to the business cycle?
A)Operating leverage.
B)Dividend policy.
C)Tax liabilities.
D)None of the above.
5
According to sector rotation analysis, investors should shift their portfolios more heavily into ______________ when the economy enters a contraction or recession.
A)cyclical industries
B)defensive industries
C)the capital goods sector
D)financial firms
6
Which of the following is a characteristic of the consolidation stage of the industry life cycle?
A)New technology
B)Many competitors
C)Slow growth
D)Emergence of industry leaders
7
Industry analysis is important because________________.
A)it is unusual for a firm in a troubled industry to perform well
B)there is considerable dispersion in stock market performance among industry groups
C)there are substantial differences in business cycle sensitivity among industry groups
D)all of the above
8
Housing starts is ______________.
A)a leading economic indicator
B)a coincident economic indicator
C)a lagging economic indicator
D)a simultaneous economic indicator
9
The level of interest rates is perhaps the most important macroeconomic factor to consider in investment analysis because:
A)Unanticipated increases in interest rates are generally associated with increases in stock prices
B)When interest rates increase, businesses increase their investments in physical capital
C)Returns on fixed income securities are adversely affected by increases in interest rates
D)All of the above are factors contributing to the importance of the level of interest rates.
10
When the Federal Reserve ______________ the discount rate, the money supply of the economy will increase.
A)raises
B)lowers
C)does not change
D)restricts
11
What is the first step of a top-down analysis of a company's prospects?
A)Analysis of the global economy
B)Analysis of the domestic economy
C)Analysis of the company's industry
D)Analysis of the company's fundamentals
12
Fiscal policy refers to the government's use of_______________ to stabilize the economy.
A)its influence on the money supply and demand
B)trade policy
C)technology development
D)its spending and tax actions
13
Which of the following is not a key economic statistic used to describe the state of the macroeconomy?
A)Unemployment rate
B)Inflation rate
C)Exchange rates
D)Interest rates
14
Which of the following risks does a U.S. company face as a direct consequence of operating in a global environment?
A)Political risk.
B)Exchange rate risk.
C)Inflation risk.
D)Both A & B.
15
Monetary policy refers to the government's ______________ to influence investment and consumption demand.
A)manipulation of the money supply
B)use of tax policy
C)use of exchange rate policy
D)regulation of interstate commerce





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