Research Analyst Certification Free Demo Test 1 /20 Research Analyst Certification Free Demo Test 1 1 / 20 1. Find out how much money a business makes in sales if 40% of its earnings (EBITDA) is 20%, the company pays Rs.2 as a dividend per share, and 40% of its earnings are given as dividends. There are 10,000 outstanding shares in total. a) Rs. 755000 b) Rs 480000 c) Rs. 625000 d) Rs. 574000 Explanation:The dividend paid per share is Rs. 2 and the number of outstanding shares are 10,000.So the total dividend paid is Rs. 2 X 10,000 = Rs.20,000The Dividend Payout ratio is 40%. This means Rs 20000 paid as divided is 40% of the Net Profit.So the Net Profit is Rs. 50000 ( 20000 / 40 x 100 )The Net Profit is 20% of EBITDA.Rs 50000 is the Net Profit, So the EBITDA will be 50000 / 20 X 100 = 250000EBITDA is 40% of the business ie Sales.EBITDA is 250000. So Sales will be 250000 / 40 X 100 = 625000 2 / 20 2. What actions can SEBI (Securities and Exchange Board of India) take against a middleman or intermediary? a) Suspend the registration of the intermediary b) Cancel the registration of the intermediary c) Issue a warning or censure d) All of the above Explanation:SEBI can take various actions against intermediaries in the securities market, including registration, inspection, penalties, and disciplinary actions for violations. It ensures fair and transparent market practices through enforcement, education, and coordination with law enforcement agencies. 3 / 20 3. A company has assets worth Rs 1,000,000, and it earns Rs 1 per share. The company’s net income is Rs 80,000. The Price-to-Earnings ratio is 12, and the Price-to-Book Value ratio is 1.3. Calculate the Asset-to-Equity ratio. a) 1.35 b) 5.40 c) 2.33 d) 1.13 Explanation:First we calculate the number of Shares.EPS = Income / No. of Shares1 = 80000 / No. of SharesSo No. of Shares = 80,000Now we calculate the Market Price of a SharePE = Market Price / EPSMarket Price = PE X EPS= 12 x 1 = 12Book Value = Price / Price to Book Ratio= 12 / 1.3 = 9.23Equity (Networth) = Book Value x No. of Shares= 9.23 x 80,000 = 738400Asset to Equity Ratio = Asset / Equity= 1000000 / 738400= 1.35 4 / 20 4. A company pays a 30% dividend on shares worth Rs 5 each. The dividend payout ratio is 40%, and the current share price is Rs 60. Calculate the P/E ratio and the Earnings Yield. a) PE = 20 , Earnings Yield = 6.88% b) PE = 14 , Earnings Yield = 8.56% c) PE = 24 , Earnings Yield = 9.50% d) PE = 16 , Earnings Yield = 6.25% Explanation:Dividend Declared is 30% of Rs 5 = Rs 1.5Dividend Payout Ratio = Yearly Dividend per Share / EPS40% ie. 0.4 = 1.5 / EPSEPS = 1.5 / 0.4 = 3.75PE = Market Price / EPS= 60 / 3.75PE = 16Earnings Yield formula is reverse of PE ratio formula x 100.= EPS / Market Price x 100= 3.75 / 60 x 1000.0625 x 100 = 6.25% 5 / 20 5. For a research report, you can easily find most of the needed data, except for what? a) Business model b) Competition in the industry c) Financial data d) Views of the Management on future opportunities and threats Explanation:Correct and detailed management views can be obtained only through personal interactions with them. These views are generally not available elsewhere. 6 / 20 6. Out of these options, which one doesn’t help you evaluate a company listed on a stock exchange? a) The P/BV Ratio b) The P/E Ratio c) The demand and supply of its securities in the stock exchange d) The Intrinsic Value Explanation:“The demand and supply of its securities in the stock exchange” is not typically considered a valuation parameter because it reflects market dynamics and investor sentiment, rather than specific financial metrics used for evaluating a company’s fundamental value. Valuation parameters usually involve financial ratios and metrics that provide a more direct assessment of a company’s worth. 7 / 20 7. __________ Bias is when people stick to old information, even if it’s not useful anymore, and use it to make decisions a) Familiarity b) Anchoring c) Herd Mentality d) Choice Paralysis Explanation:Investors hold on to some information that may no longer be relevant, and make their decisions based on that. New information is labelled as incorrect or irrelevant and ignored in the decision making process. This is known as Anchoring bias. 8 / 20 8. Which of these is not part of ‘Unfair Trade Practice’? a) Manipulation b) Publishing Falsehood c) Publicly known information d) Misleading Advertisement Explanation:Some of the instances of unfair trade practices cited in the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulation, 2003 are as follows:a) A wilful misrepresentation of the truth or concealment of material fact in order that another person may act, to his detriment b) A suggestion as to a fact which is not true, by one who does not believe it to be true c) An active concealment of a fact by a person having knowledge or belief of the fact d) A promise made without any intention of performing it e) A representation, whether true or false, made in a reckless and careless manner.Publicly know information is not a unfair trade practice. 9 / 20 9. 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 Explanation:Attractive Industry from shareholders’ perspective is one that has one or more the following salient features that create a profitable atmosphere for the business:Low competitionHigh barriers to entryWeak suppliers’ bargaining powerWeak buyers’ bargaining powerFew substitutesIf an industry is having these features, it would have strong pricing power and high profit margins and attract investors. 10 / 20 10. If a multinational company’s distribution channel is unhappy with selling the products, can those products still be sold effectively? a) Yes b) No Explanation:A company may have a good product, good marketing etc. but to make the product reach the consumers, it needs a good distribution network. If the distributors , retailers etc. are not happy (due to any reason) , this product may not reach the consumers. 11 / 20 11. If a company’s EBIT (Earnings Before Interest and Taxes) is Rs 25,000, and it represents 50% of the business, what is the Net Profit of the company if the Net Profit margin is 15%? a) Rs 3750 b) Rs 7500 c) Rs 750 d) Rs 12500 Explanation:The EBIT is Rs 25000 which is 50% of the business ie. sales.So Sales = Rs 50000Net Profit margin is 15% ie. Net profit is 15% of Rs 50000 = Rs 7500 12 / 20 12. What methods can the Government use to manage or lower inflation? a) By reducing demand b) By increasing supply c) Both 1 and 2 d) None of the above Explanation:Inflation can be caused by demand pull factors or cost push factors. An increase in the price of goods and services because demand being in excess of available supply, is called demand pull inflation. An increase in prices because of an increase in input costs is called cost-push inflation. To defuse the inflation, policy makers adopt several measures to reduce the demand or increase the supply or both. 13 / 20 13. What technological factor(s) make a country more appealing to investors? a) Institutions driving technology based initiatives b) Availability of technology savvy population c) Less technological support d) Both 1 and 2 Explanation:Availability of technology savvy population and institutions driving technology based initiatives and infrastructure help a country attract investors. 14 / 20 14. Investment advisers assist investors in determining asset allocation and selecting investments based on ________.” a) Assessment of their needs b) Ability to bear risk c) Time horizon of investments d) All of the above Explanation:Considering all these factors together allows investment advisers to create a well-rounded investment plan that suits the individual investor’s circumstances and objectives. 15 / 20 15. A “_________ Wall” policy creates a division between areas for ‘insiders’ and areas accessible to the public within a company. a) Chinese b) Indian c) Berlin d) Hard rock Explanation:To prevent the misuse of confidential information the organisation shall adopt a “Chinese Wall” policy which separates those areas of the organisation/firm which routinely have access to confidential information ie. “insider areas” from those areas which deal with sale/marketing/investment advice or other departments providing support services considered public areas.The employees in the insider area shall not communicate any Price Sensitive Information to anyone in the public area. 16 / 20 16. Macroeconomics helps us grasp the overall condition of the economy, and this condition is shaped by ________. a) Domestic Consumption b) General Price levels c) Domestic Production d) All of the above Explanation:Macroeconomics helps us understand the general state of the economy – DomesticProduction, Domestic Consumption, General Price levels, Growth, Quality of life etc. 17 / 20 17. The most important factor to consider when analyzing the Telecom sector is _________. a) Average Revenue Per Unit (ARPU) b) Monetary Policy by the RBI c) Footfalls d) Internal Rate of Return (IRR) Explanation:ARPU is calculated by total revenue divided by number of subscribers. The higher it is, thebetter for the company. 18 / 20 18. Inflation risk means the money you get from an investment may be worth less when adjusted for inflation. Is this True or False? a) True b) False Explanation:Inflation risk represents the risk that the money received on an investment may be worth LESS when adjusted for inflation.For eg – If the inflation is 9% and the investment are earning 8%, such investments are exposed to inflation risk. 19 / 20 19. The Net Profit margin of a company is 25%. The company’s EBIT % is 50%, and EBIT is Rs 450,000. There are 30,000 shares outstanding. Calculate the Earnings per share (EPS). a) 15 b) 7.50 c) 9.80 d) 11.50 Explanation:The EBIT is Rs 450000 which is 50% of the business ie. sales.So Sales = Rs 900000 (450000 / 50 x 100)Net Profit margin is 25% ie 25% of Sales Rs 90000025% of Rs 900000 = 225000EPS = Net Profit / No. of Shares= 225000 / 30000 = 7.5 20 / 20 20. If a stock has gone beyond its Target Price, what might an analyst suggest? a) Buying the stock b) Selling the stock c) Holding on to the stock d) None of the above Explanation:Target price is that price, which if achieved, would result in an investor recognizing the best possible outcome for his or her investment.This is the price at which the investor would like to exit his or her existing position so that he or she can realize the most reward.For eg. – A analyst recommends buying XYZ stock at Rs 100 with a target price of Rs 160. So when the price rises to Rs 160, the target has been achieved and the analyst will recommend selling the stock at Rs 160. Your score is 0% Restart quiz Exit
