NISM-Series XV: Research Analyst Certification 'Final Test 1'

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NISM-Series XV: Research Analyst Certification ‘Final Test 1’

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1. What industry is classified as a ‘Defensive’ industry?

a) Processed Foods

b) Tourism

c) Defense Equipment

d) Media and information

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2. If the cost of equity is 11%, the cost of debt is 8%, and the weight of equity is 60%, what is the weighted average cost of capital?

a) 8.9%

b) 10.7%

c) 10.1%

d) 9.8%

3 / 100

3. If a company’s shares have a face value of Rs. 5, it pays a dividend of 15%, has a 100% dividend payout ratio, and a current book value of Rs. 80, what is the Earnings Yield?

a) 10%

b) 7.5%

c) 2%

d) Insufficient data – Cannot be calculated

4 / 100

4. In India, excise duty is levied on _______ .

a) Plastic products

b) Detergents

c) Alcoholic beverages

d) All of the above

5 / 100

5. In SWOT analysis, an enhanced medical insurance cover would be regarded as _______ for the healthcare industry

a) Opportunity

b) Weakness

c) Threats

d) Strength

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6. Despite data suggesting a potential decrease in equity share prices, the research analyst strongly believes they might rise. What should the analyst advise their clients?

a) As the analyst is in two minds, he should not recommend anything on that equity share

b) Intuitions usually come true and the analyst should recommend a buy or hold rating

c) The analyst should recommend a sell rating on that equity share as this is what the data and indicators are pointing to

d) The analyst can give two recommendations – one based on intuition and other on indicators

7 / 100

7. For plain vanilla fixed-rate bonds, ________ are definite and known to bond investors.
A. The Capital Appreciation
B. The amount of cash flows
C. The timing of cash flows

a) Only A

b) Only B and C

c) Only A and B

d) All A, B and C

8 / 100

8. If a company’s Total Assets are Rs 100,000 and Total Liabilities are Rs 74,000, what is the Equity to Asset Ratio?

a) 3.41

b) 0.74

c) 1

d) 0.26

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9. When a research analyst provides a __________ rating, it’s similar to a BUY rating.

a) Out perform

b) Accumulate

c) Hold

d) All of the above

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10. If a company’s EV/EBITDA ratio is 4 and it has reported an EBITDA of Rs. 180 crores, with a net debt of Rs. 310 crores, what is the value of equity?

a) Rs. 410 crores

b) Rs. 490 crores

c) Rs. 310 crores

d) Rs. 180 crores

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11. __________ policy stance is usually adopted during recessions or a slow-moving economy.

a) Neutral fiscal policy

b) Expansionary fiscal policy

c) Contractionary fiscal policy

d) None of the above

12 / 100

12. Are Securities and Exchange Board of India (Research Analyst) Regulations, 2014 applicable to Fund Managers of Alternative Investments Funds?

True or False?

a) True

b) False

13 / 100

13. Which of the following is considered an economic factor in PESTLE analysis?

a) Country’s dependence on other countries in terms of important natural resources

b) Forex reserves

c) Monitory policies of the RBI

d) All of the above

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14. Is it true or false that the certificate of registration granted to a Research Analyst under regulation 9 is valid for five years?

a) True

b) False

15 / 100

15. In which analysis the performance, the structure and the conduct of an industry is considered ?

a) BCG Analysis

b) SCP Analysis

c) Michael Porter’s Model

d) PESTLE Analysis

16 / 100

16. If a company’s Debt to Equity Ratio is 2:1 and the total size of its Balance Sheet is Rs 27,00,000, what is the Debt of the company?

a) Rs 6,00,000

b) Rs 27,00,000

c) Rs 18,00,000

d) Rs 9,00,000

17 / 100

17. If a company has total liabilities of Rs 8,000 and total assets of Rs 20,000, what is the Equity to Asset ratio?

a) 1.1

b) 0.60

c) 0.40

d) 1.4

18 / 100

18. If a company has sales of Rs 12,400 and an operating profit of Rs 2,400, with a corporate tax rate of 35%, what is the net profit margin of the company? (Assuming no interest expense)

a) 14.70%

b) 12.58%

c) 10.87%

d) 7.66%

19 / 100

19. __________ manages issues related to both Direct and Indirect Taxes through two statutory Boards, namely, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC).

a) Department of Economic Affairs

b) Department of Revenue

c) Income Tax Department

d) Department of Financial Services

20 / 100

20. The Debt to Equity Ratio of a company is 3:1 and the total size of its Balance Sheet is Rs. 40,00,000. If the return on equity is 27%, calculate the Net Profit of the company.

a) Rs 270000

b) Rs 318000

c) Rs 214000

d) Rs 174000

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21. Is it true or false that Opportunities and Threats pertain to the external environment of the business?

a) True

b) False

22 / 100

22. There are two companies with P/E ratios of 40 and 13, and different growth potentials of 30% and 8% for the next few years. Which company is considered cheaper based on the PEG ratio?

a) The company with P/E ratio of 40

b) Insufficient data

c) The company with P/E ratio of 13

d) Both are equally cheaper

23 / 100

23. Is it true or false that Business risk, also known as operating risk, is caused by factors affecting the operations of the company?

a) True

b) False

24 / 100

24. If a business has a paid-up capital of Rs 20 lakhs, an EPS of Rs. 8, and a face value of each share as Rs 5, what is the Return on Capital if the Book Value per share is Rs 40?

a) 30%

b) 50%

c) 200%

d) 20%

25 / 100

25. A company that operates like a monopoly and isn’t threatened by competition would be considered a ________ company for investors.

a) Attractive

b) Unattractive

c) This is not a criteria for investors to invest

d) None of the above

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26. If the price is the same as the value, then the asset is considered __________.

a) Fairly priced

b) Under Priced

c) Over Priced

d) None of the above

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27. When an investor predicts the future based on the recent past, completely ignoring the distant past, this bias is called ________.

a) Confirmation bias

b) Herd mentality

c) Ownership bias

d) Projection bias

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28. During an economic slowdown, the unemployment rate _______.

a) falls

b) rises

c) there is no effect on unemployment rate

d) None of the above

29 / 100

29. To conduct business in any country, a business must thoroughly understand various factors and how changes in any of these would impact business. This in-depth analysis is known as BCG Matrix analysis. True or False?”

a) True

b) False

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30. When the entire face value of a debenture is converted into equity shares, it is known as _____________.

a) Fully Convertible Debenture

b) Non Convertible Debenture

c) Partly Convertible Debenture

d) None of the above

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31. Some companies outperform others in an industry due to their _______.

a) unique Value Proposition

b) unique ways of mitigating risks and maximizing returns

c) unique Selling Points

d) All of the above

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32. If a business has gross sales of Rs 200,000, a Net Profit margin of 12%, and a Return on Equity of 25%, what is the Equity Capital of this business?

a) Rs 59000

b) Rs 96000

c) Rs 84000

d) Rs 24000

33 / 100

33. Does the Efficient Market Hypothesis (EMH) assert that share prices incorporate and reflect all relevant information? True or False?

a) True

b) False

34 / 100

34. During an economic slowdown, the unemployment rate _______ and during an expansion phase, the unemployment rate ________.

a) falls , falls

b) rises , rises

c) falls , rises

d) rises , falls

35 / 100

35. What is the earnings yield if the stock price is Rs. 540 and the EPS is Rs. 32?

a) 0.0592%

b) 5.92%

c) 0.1687%

d) 16.87%

36 / 100

36. What is the formula for calculating Price to Earning Ratio?

a) Market Price of the stock / EPS

b) Market Price of the stock X EPS

c) EPS / Market Price of the stock

d) None of the above

37 / 100

37. Macroeconomics helps us understand the drivers of income, savings, investments, and employment in an economy.

a) Macroeconomics

b) Microeconomics

c) Both Microeconomics and Macroeconomics

d) None of the above

38 / 100

38. The Net Profit of a company is Rs 75 crores. The company’s equity capital is Rs 5,73,47,560, and it has not issued any preference shares. The face value of its shares is Rs 5. Calculate the Earnings Per Share (EPS) of the company.

a) 109.12

b) 88.50

c) 65.39

d) 24.66

39 / 100

39. Investors gain confidence in old companies with a long track record because _________.

a) these companies have more knowledge and experience within to meet new challenges

b) these companies have seen many business cycles

c) these companies have very good historical financial

d) Both 1 and 2

40 / 100

40. In technical analysis, the impact of day-to-day fluctuations in prices is nullified by which of the following factors?

a) Increasing Time Period of price charts

b) Using Moving Averages

c) Using liquidity parameter along with prices

d) None of the above

41 / 100

41. In which bias, do investors experience losses even after having won a trade?

a) Winner’s curse

b) Herd mentality

c) Projection bias

d) Gambler’s fallacy

42 / 100

42.

The margin(s) charged by the Clearing Corporations is/are _______ .

a) Initial or upfront margin

b) Mark to market

c) Value At Risk

d) Both 1 and 2

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43. Determine the Market Capitalization of a company given the following details: Paid Up Capital – Rs 50 Lakhs Face Value of Shares – Rs 5 PE Ratio – 8 EPS – Rs 5

a) Rs 580 Lakhs

b) Rs 400 Lakhs

c) Rs 350 Lakhs

d) Rs 450 Lakhs

44 / 100

44. What is the Enterprise Value of the firm if the Market Capitalisation is Rs 50 lakhs, total debt is Rs 10 lakhs, and cash in hand is Rs 3 lakhs?

a) Rs 50 Lakhs

b) Rs 63 Lakhs

c) Rs 57 Lakhs

d) Rs 43 Lakhs

45 / 100

45. Regulators in the Indian Financial Market ensure that _______ .

a) securities market becomes a major source of finance for corporate and government

b) the interest of investors is protected

c) the market participants behave in a responsible manner

d) All of the above

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46.

Inflation will lead to _________ in price levels in the economy.

a) Increase

b) Decrease

c) no change

d) None of the above

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47. Which measure of bond yield will be most appropriate for an investor planning to hold a coupon-paying Government bond until maturity?

a) Current Yield

b) Yield to Maturity

c) Holding Period Returns

d) None of the above

48 / 100

48. Calling feature in bonds __________.

a) Is against the interest of issuers

b) Favours investors

c) Is most prevalent when interest rates are expected to fall

d) Is most prevalent when interest rates are expected to rise

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49.

What is the Price to Earning ratio of a stock with a current price of Rs 180 and a last EPS of Rs 10?

a) 1800

b) 180

c) 18

d) 1.8

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50. True or False: Investors prefer businesses with low entry barriers.

a) True

b) False

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51. Companies Act requires that a company which wants to raise further capital through an issue of shares must first offer them to the existing shareholders and such an offer of shares is known as ______.

a) Rights Issue

b) Bonus Issue

c) Rights Issue

d) Preference Issue

52 / 100

52. Foreign Direct Investment (FDI) is welcomed by all the developing economies as it

a) access to traditional technologies

b) both 1 and 2

c) brings in new products and services

d) Rs 9 brings in new managerial skills

53 / 100

53. Under the Department of Financial Services of the Finance Ministry, the policies related to

a) Life Insurance and General Insurance

b) Financial Services provided by various government agencies and private corporations

c) Pension reforms

d) All of the above

54 / 100

54. The market capitalisation of a company is Rs 5,40,000 and the book value per share is Rs 35. The P/E ratio is 9 and the EPS is Rs 6. Calculate the Networth of the company.

a) Rs 35000

b) Rs 400000

c) Rs 40000

d) Rs 350000

55 / 100

55.

Research Analysts who are individuals or partnership firms shall have net tangible assets of value not less than Rs. __________ .

a) Rs 2 lakhs

b) Rs 10 lakhs

c) Rs 1 lakh

d) Rs 5 lakhs

56 / 100

56. Research Analysts facilitates the decision making by the investors in both investments and disinvestment’s – State True or False ?

a) False

b) True

57 / 100

57. A well informed long term investor should also be concerned about the short term fluctuations in the stock market – State True or False ?

a) False

b) True

58 / 100

58. ______ has an obligation to sell an asset at a predetermined price.

a) Call Writer

b) Put Buyer

c) Call Buyer

d) Put Writer

59 / 100

59. Careful analysis of historical financials is NOT required in which business analysis ?

a) Quantitative

b) Qualitative

c) Valuation

d) All of the above

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60. A bond is issued at a face value of Rs. 100 and a coupon of 9% p.a. The interest rates in the market have increased subsequently. This bond is likely to quote at:

a) At the face value

b) At a price below face value

c) At a price that reflects its credit risk

d) At a price above face value

61 / 100

61. When the government’s spending is lower than its income and it uses the excess income to repay its debts/obligations or acquire assets – This is known as _____________.

a) Expansionary fiscal policy

b) Expansionary fiscal policy

c) Contractionary fiscal policy

d) None of the above

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62. The growth rate can be calculated as the ________ of the retention rate and the return on equity.

a) product

b) division

c) summation

d) None of the above

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63. Strengths and Weaknesses are _________ elements of a business.

a) Physiological

b) Internal

c) External

d) All of the above

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64. Warrants are options that entitle an investor to buy _______ of the issuer company after a relatively _____ period of time at a given price.

a) bonds , long

b) common stock , long

c) bonds , short

d) common stock , short

65 / 100

65. The analysis done more from the perspective of a business which is looking to setup unit offshore and analyzing several countries to choose from is known as ________ .

a) PESTLE Analysis

b) BCG Analysis

c) SCP Analysis

d) None of the above

66 / 100

66. Companies Buyback shares __________ .

a) to reduce equity and resultantly increase the leverage in the company

b) if it has excess cash and there are lack of profitable investment opportunities

c) when the management thinks that the stock is undervalued.

d) All of the above

67 / 100

67. Mrs. Reeta purchases MF units at NAV Rs 13. After 500 days , she redeems it at NAV Rs 15.70. What is the compounded rate of return ?

a) 14.7%

b) 10.88%

c) 9.63%

d) 12.3%

68 / 100

68.

If the inventory is priced at Rs 8000, what are the Current Assets of the company when the Current Ratio is 2 and the Quick Ratio is 1.5?

a) Rs 12,000

b) Rs 22,000

c) Rs 32,000

d) Rs 42,000

69 / 100

69. The Market Capitalisation of a company is calculated as _________ .

a) Face Value of the Share X The No. of shares outstanding

b) Book Value of the Share X The No. of shares outstanding

c) EPS of the Share X The No. of shares outstanding

d) Market Price of the Share X The No. of shares outstanding

70 / 100

70. Some very important regulatory aspect(s) have to be looked into by analyst while analysing businesses in India include ________ .

a) FDI in multi brand retail

b) Policy regarding cancellation of licenses

c) Environment policies

d) All of the above

71 / 100

71. A fund manager buys a security to maintain its weight in the portfolio. What does this indicate ?

a) The portfolio was overweight in that security

b) Nothing can be indicated from this information

c) The portfolio was underweight in that security

d) None of the above

72 / 100

72. The sales of M/s. XYZ ltd. is Rs 10,00,000, its Equity Capital is Rs. 4,00,000 and the return on equity is 18%. Find the Net Profit Margin of this company.

a) 7.2%

b) 12.78%

c) 3.5%

d) 18%

73 / 100

73. The Depository Receipts which are issued in India and listed on an Indian Stock

a) Global Depository Receipts (GDRs)

b) Indian Depository Receipts (IDRs)

c) American Depository Receipts (ADRs)

d) Exchange with foreign stocks as underlying shares are known as _______.

74 / 100

74. Which of the below mentioned option(s) is true for CAGR ?

a) CAGR does not take into account the timings of cash flows into account

b) CAGR is calculated as the sum of annual returns over the holding period

c) CAGR means Compounded Annual Growth Rate

d) All of the above

75 / 100

75. Which of the following is Systematic Risk ?

a) Credit risk

b) Market risk

c) Business risk

d) Liquidity risk

76 / 100

76. he sales of M/s NM Enterprises was Rs 200000 and the cost of goods sold were 20% of sales. Operating Expenses and Depreciation were Rs 56000. The Interest expenses were Rs 23000. Calculate the Net Income if the company pays 35% of its pretax income as tax.

a) Rs 63750

b) Rs 46000

c) Rs 52650

d) Rs 55,700

77 / 100

77. _________ is the nodal agency of the Central Government to formulate and
monitor India’s macroeconomic policies.

a) Department of Financial Services

b) Department of Economic Affairs

c) RBI

d) Department of Revenue

78 / 100

78. An agent who buys and sells shares in a recognised stock exchange is known as ______ .

a) Depository Participant

b) Merchant Banker

c) Underwriter

d) Stock Broker

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79. Of the below given options, which is NOT a component of the Current A/c of a country with the rest of the world ?

a) Exports

b) Imports

c) Loans

d) None of the above

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80. An industry which does not face the threat of new competitors coming in would be an attractive industry for investors/owners – State True or False ?

a) False

b) True

81 / 100

81. In a research report, visuals are used to make it simple for the reader to understand it. Which of the below options is NOT a visual ?

a) formulas

b) exhibits

c) charts

d) graphs

82 / 100

82. What does the Insurance Regulatory and Development Authority (IRDA) define for Insurance Companies ?

a) modalities for investment of funds by insurance companies

b) rules for distribution of insurance products

c) capital and networth requirements for insurance companies

d) All of the above

83 / 100

83. __________ is NOT a department of Ministry of Finance.

a) Department of Economic Affairs

b) Department of Disinvestments

c) Reserve Bank of India

d) Department of Revenue

84 / 100

84. To be eligible for a share buyback, a company should not have defaulted on ___________ .

a) payment of dividend declared

b) its payment of interest or principal on debentures

c) redemption of preference shares

d) All of the above

85 / 100

85. The Price to Book Value Ratio of a company is 12 and the Book Value is 7. The Market Capitalisation is Rs 21,00,000. Find the number of shares outstanding.

a) 39,500

b) 12,500

c) 25,000

d) 32,600

86 / 100

86. When shares are compulsory delisted on a stock exchange, such delisting is basically due to __________ .

a) non-compliance to regulations of the stock exchange

b) have freedom to execute a changed strategy

c) regulatory reporting complexities

d) mergers and acquisitions

87 / 100

87. When shares are split, the face value of the share goes up – State True or False ?

a) True

b) False

88 / 100

88. The unique parameters for evaluation of Retail Sector is ______ .

a) Financial results of the last 5 years

b) Average Revenue Per User

c) Footfalls and same store sales

d) All of the above

89 / 100

89. When does the per share data (earning per share, book value per share, market price per share etc.) witnesses immediate deterioration.

a) In case of Stock Consolidation

b) In case of a Bonus Issue

c) Both 1 and 2

d) In case of a Stock Split

90 / 100

90. Over pricing of securities by the market is favourable to the investors – State True or False ?

a) True

b) False

c) Rs 8 Lakhs

d) Rs 9 Lakhs

91 / 100

91. ________ can be considered as a matured industry in India.

a) Oil & Gas Industry

b) Bio-Tech Industry

c) E-Commerce Industry

d) Fintech Industry

92 / 100

92. The current inventory of the company is Rs 2,000. The average age of inventory for this company is 10 days. Calculate the Sales of the company over the last year. (Assume 365 days in a year)

a) Rs 36,500

b) Rs 73,000

c) Rs 25,000

d) Rs 56,500

93 / 100

93. In Structure Conduct Performance (SCP) Analysis, while analyzing ‘Performance’ of an industry, analysts will look at __________ .

a) the Return on Capital Employed

b) the competition in the industry

c) Both 2 and 3

d) the Return on Equity

94 / 100

94. Job of Research Analysts involves ________ .

a) collection of data and its scientific analysis

b) close interaction with clients

c) close interaction with companies

d) All of the above

95 / 100

95. Pricing of products and services in the market mainly depends on _______ .

a) The integrity of the management

b) Demand and Supply

c) Distribution reach

d) All of the above

96 / 100

96. The SEBI Act empowers SEBI to take following actions EXCEPT –

a) Develop and Administer certification exam

b) Suspend an office bearer of a SEBI registered entity

c) Impound and retain the proceeds or securities in respect of any transaction which is in violation or prima facie in violation of regulations

d) Suspend trading in a security at a Stock Exchange

97 / 100

97. The important factor(s) for long term sustainability of a business with regard to competition is/are ___________ .

a) No entry barriers

b) Strong entry barriers

c) Easy exit for the business

d) All of the above

98 / 100

98. The investor receives only one time cash inflow in which of the following asset ?

a) Equity

b) Both 2 & 3

c) Bonds

d) Gold

99 / 100

99. The job of an Research Analyst involves ________ .

a) Convincing the investors to buy securities

b) Data collection and its analysis

c) Taking investment decisions

d) All of the above

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100. An industry is a good choice for investment if it has _________.

a) Low competition

b) Weak bargaining powers of the buyers

c) High barriers to entry

d) All of the above

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NISM-Series XV: Research Analyst Certification 'Final Test 1'