Research Analyst Certification Free Demo Test 4 /20 Research Analyst Certification Free Demo Test 4 1 / 20 1. In discounted cash flow-based valuation, how does the increase in the risk-free rate affect the value of shares? a) An increase in the risk-free rate would lead to a decrease in the fair value of shares. b) An increase in the risk-free rate would result in a higher fair value for shares. c) The risk-free rate would not affect share prices. Your answer is Incorrect Your answer is correct Explanation:In discounted cash flow-based valuation, alterations in the risk-free rate of return affect bond prices but do not impact share prices. 2 / 20 2. Which of these segments are essential to incorporate in a company research report? a) Shareholding pattern of the company and its financial indicators b) Comprehensive industry overview and peer group analysis c) Both of the above d) None of the above Your answer is Incorrect Your answer is correct Explanation:The essential components of a research report comprise: Company business description, peer group analysis, shareholding pattern, key strengths, key concerns, industry overview, company fundamentals, vital financial indicators, and financial statements. 3 / 20 3. The reduction of a country’s fiscal deficit can be achieved by: A. Decreasing public expenditure B. Disposing of assets through disinvestment C. Augmenting tax collections a) Only A b) Only B c) Only A & C d) All of the Above Your answer is Incorrect Your answer is correct Explanation:Fiscal deficit refers to the planned excess of a government’s expenditure over its revenues within a specific year.Strategies to Decrease Government Deficit:Prioritize tax-based revenues, implementing measures to curb tax evasion effectively.Opt for disinvestment in underutilized assets.Reduce government subsidies to mitigate the deficit.Avoid unplanned expenditures whenever possible.Secure funds through borrowing from domestic sources.Explore borrowing options from external sources.Broaden the tax base to aid in reducing the government deficit. 4 / 20 4. In the Porter’s Five Forces model, ________ is regarded as a lateral influence. a) Supplier Bargaining Power b) Customer Bargaining Power c) Threat of New Entrants d) All of the Above Your answer is Incorrect Your answer is correct Explanation:Michael Porter’s Industry Analysis Model, known as the Five Forces Model, evaluates industries based on five key forces categorized into two vertical and three horizontal elements.Horizontal Forces:Threat of SubstitutesThreat of New EntrantsThreat of Established RivalsVertical Forces:Bargaining Power of SuppliersBargaining Power of Customers 5 / 20 5. One of the objectives that a research report does not aim to achieve is __________. a) Offering market perspective b) Providing concise company analysis c) Presenting investment opportunities d) All of the Above Your answer is Incorrect Your answer is correct Explanation:A comprehensive research report is expected to offer an in-depth company analysis rather than a brief overview. It should encompass intricate details such as the company’s business model, competitive advantages, opportunities, threats, management competency, and vision, among other essential factors. 6 / 20 6. Which of these elements is incorporated in an Income Statement? a) Depreciation and Amortisation b) Long-term debt c) Accounts receivable d) Current assets and Current liabilities Your answer is Incorrect Your answer is correct Explanation:The Income Statement, also known as the Profit and Loss Statement, encompasses all types of expenses incurred by a company. Depreciation and amortisation are considered company expenses.Depreciation signifies the gradual and permanent reduction in the value of assets due to aging, use, and obsolescence, while amortisation refers to the gradual write-off of intangible assets over their lifespan.On the other hand, Accounts Receivable, Long-term Debt, Current Assets, and Current Liabilities are components featured in the company’s Balance Sheet. 7 / 20 7. Typically, during economic expansions, the unemployment rate ________. a) Rises b) Falls c) remains constant Your answer is Incorrect Your answer is correct Explanation:The unemployment rate represents the percentage of the eligible and willing-to-work population without jobs in a country.In economic slowdowns, the unemployment rate increases, while during expansion phases, it decreases due to the creation of more jobs with the rise in production. 8 / 20 8. Which of the following details could be classified as insider information? a) The count of employees working remotely b) The Managing Director discussing an undisclosed acquisition proposal c) Details about the factory operating additional shifts, publicly announced but not yet published in the annual report Your answer is Incorrect Your answer is correct Explanation:Insider information pertains to significant non-public data that, upon disclosure, would promptly influence an investor’s decision to trade securities. The classification of information as insider depends on its source reliability, impact, and certainty.Among the options provided, the Managing Director discussing an undisclosed acquisition proposal is deemed insider information. 9 / 20 9. According to SEBI (Research Analyst) Regulations – Regulation 8, corporate entities aiming to register with SEBI as Research Analysts must maintain a minimum net worth of ________. a) 25 Lacs b) 50 Lacs c) 70 Lacs d) 1 Cr Your answer is Incorrect Your answer is correct Explanation:Regulation 8, regarding capital adequacy, states that individual or partnership research analysts must maintain net tangible assets of at least one lakh rupees. For research analysts operating as body corporate or limited liability partnership firms, a minimum net worth of twenty-five lakh rupees is required. 10 / 20 10. Exclusions from unfair trade practices include: a) Misleading information b) Publicly known information c) Wilful mis-statement d) Active concealment Your answer is Incorrect Your answer is correct Explanation:Publicly known information does not fall under unfair trade practices as per the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulation, 2003. 11 / 20 11. What elements are typically included in an income statement? a) Fixed Assets b) Long-term Debt c) Accounts Receivables d) Cost of Goods Sold Your answer is Incorrect Your answer is correct Explanation:The cost of goods sold represents the expenses associated with producing goods. An income statement encompasses various expenditures, incorporating the cost of raw materials in manufacturing companies, contributing to the production of finished goods.Therefore, the ‘Cost of Goods Sold’ is a component of the Income Statement. On the other hand, accounts receivable, long-term debt, and fixed assets are integral components featured in the Balance Sheet of the company. 12 / 20 12. In a business, when is innovation and customer service particularly essential? a) In the absence of Industry Rivalry b) In the presence of limited Industry Rivalry c) In the face of heightened Industry Rivalry d) None of the provided options Your answer is Incorrect Your answer is correct Explanation:In industries characterized by intense rivalries, such as aviation and telecom, the outcome is diminished pricing power and reduced earnings for participants. In such sectors, the importance of innovation in products, as well as customer service and engagement initiatives, becomes paramount. 13 / 20 13. The buying and selling of newly issued shares occur in _______. a) Primary Market b) Secondary Market c) Money Market d) Currency market Your answer is Incorrect Your answer is correct Explanation:The primary market is utilized by issuers to raise fresh capital from investors through the issuance of securities. Conversely, the secondary market offers liquidity to these instruments, allowing for the trading of previously issued securities. This mechanism enables investors to either exit their investments or allows new investors to purchase existing securities. 14 / 20 14. The Government finances expenditures through _______. a) Taxation b) Sale of assets c) Borrowings d) All of the above Your answer is Incorrect Your answer is correct Explanation:The Government funds expenditures through various means, including taxation, interest and dividend income, borrowing, and the sale of assets. 15 / 20 15. Considering the Growth Adjusted Price to Earnings Ratio (PEG Ratio), which company is more cost-effective: M/s ABC Ltd with a P/E Ratio of 12 and a growth potential of 10%, or M/s XYZ Ltd with a P/E Ratio of 28 and a growth potential of 35% in the coming years? a) XYZ Ltd b) ABC Ltd c) PEG Ratio cannot determine the valuation d) Callable bonds Your answer is Incorrect Your answer is correct Explanation:By calculating the PEG ratio using the formula P/E Ratio / Growth Rate, we find:PEG for ABC Ltd: 12 / 10 = 1.2PEG for XYZ Ltd: 28 / 35 = 0.8Therefore, XYZ Ltd is considered more affordable as it has a lower PEG ratio compared to ABC Ltd. 16 / 20 16. Markets typically do not penalize investors who are _________. a) Speculative b) Disciplined c) Unorganised d) Emotional Your answer is Incorrect Your answer is correct Explanation:Disciplined investing is generally rewarded by the market, while emotional, distracted, and disorganized approaches are often penalized. 17 / 20 17. Determine the total sales for a business using the given information:Earnings Per Share (EPS) is 5.The number of shares outstanding is 50,000.Earnings Before Interest and Taxes (EBIT) accounts for 40% of the total sales.EBIT is equivalent to 400% of the Net Profit. a) Rs 50 Lakhs b) Rs 25 Lakhs c) Rs 65 Lakhs d) Rs 95 Lakhs Your answer is Incorrect Your answer is correct Explanation:The net profit is calculated as follows: EPS x No. of Shares = 5 x 50,000 = Rs. 2,50,000.Given that EBIT is 400% of the net profit, EBIT = Rs. 10,00,000 (250,000 x 400 / 100).Additionally, as EBIT is 40% of sales, the total sales amount to Rs. 25,00,000 (100 x 1,000,000 / 40). 18 / 20 18. Is it true or false that in Top Down Analysis, primary importance is given to the detailed study of the business and industry, with economic factors not being of primary significance? a) True b) False Your answer is Incorrect Your answer is correct Explanation:The Top-Down approach initiates with economic analysis, progresses to industry analysis, and concludes with the selection of companies within an industry.In contrast, the Bottom-Up approach commences with company analysis, followed by industry and economic analyses. At times, bottom-up analysts concentrate exclusively on the dynamics of business and industry, often giving minimal attention to economic factors, as their primary focus revolves around acquiring and retaining fundamentally robust businesses. 19 / 20 19. What is the market capitalization of a company with a face value of Rs 10 per share, a paid-up capital of Rs 30 lakhs, a P/E ratio of 12, and an EPS of Rs 10? a) Rs 460 lakhs b) Rs 360 lakhs c) Rs 260 lakhs d) Rs 160 lakh Your answer is Incorrect Your answer is correct Explanation:The company has 3 lakh shares (calculated as 3000000 / 10). With a P/E ratio of 12 and an EPS of Rs 10, the market price per share is Rs 120 (12 x 10). Therefore, the market capitalization is Rs 36,00,00,000 (120 x 3,00,000). 20 / 20 20. Given a share trading at Rs 40.50 and a P/E ratio of 13.50, with a 70% dividend payout ratio, determine the dividend per share. a) Rs 3.50 b) Rs 5.98 c) Rs 1.69 d) Rs 2.10 Your answer is Incorrect Your answer is correct Explanation:The Dividend Payout Ratio (DPR) signifies the portion of net income distributed to shareholders as dividends. To calculate the Dividend Per Share (DPS), first determine the Earnings Per Share (EPS). With a P/E ratio of 13.50 and a share price of Rs 40.50, the EPS is Rs 3. Considering a 70% DPR, the DPS is calculated as 70% of EPS, resulting in Rs 2.10. Therefore, the Dividend Per Share amounts to Rs 2.10. Your score is 0% Restart quiz Exit
