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ACCOUNTING CFA Overview of Equity and Intro to Company and Industry Analysis |It’s a study guide solution with possible 2024 exam questions with explanation| Concordia University

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ACCOUNTING CFA

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ACCOUNTING CFA Overview of Equity and Intro to Company and Industry Analysis |It’s a study guide solution with possible 2024 exam questions with explanation| Concordia University Question #1 of 73 An aggressive price reduction to gain market share is most likely to be associated with a: /...

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accounting cfa
cfa overview of equity and intro to com
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accounting cfa concordia university
participating preference shares most likely
private equity securities most likely

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ACCOUNTING CFA Overview of Equity and Intro to Company and
Industry Analysis (It’s a study guide solution with possible 2024 exam
questions with explanation) Concordia University

1 of 23

,Question #1 of 73

An aggressive price reduction to gain market share is most likely to be associated with a:

/ A) service differentiation strategy.
6 B) cost leadership strategy.
/ C) product differentiation strategy.

Explanation

Michael Porter identified two competitive strategies: cost leadership and product or service differentiation. A firm that uses a cost
leadership or low-cost strategy seeks to have low production costs that will enable it to offer lower prices than its competitors to protect
or gain market share. A product or service differentiation strategy seeks to gain a price premium for its products by making them
distinctive to the consumer.

Question #2 of 73 Question ID: 415255

Participating preference shares most likely:

/ A) can be exchanged for common stock at a ratio determined at issuance.
6 B) receive extra dividends if firm profits exceed a predetermined threshold.
/ C) give the shareholder the right to sell the shares back to the firm at a specific price.

Explanation

Participating preference shares receive extra dividends if firm profits exceed a predetermined threshold. Convertible preference shares can
be exchanged for common stock at a conversion ratio determined at issuance. Putable common shares give the shareholder the right to sell
the shares back to the firm at a specific price.

Question #3 of 73 Question ID: 415261

Private equity securities most likely:

6 A) are illiquid and do not have quoted prices.
/ B) are issued to individual investors.
/ C) trade in over-the-counter dealer markets.

Explanation

Private equity securities are illiquid and do not trade in public securities markets. Holders of private equity must negotiate with other
investors to sell the securities. Private equity securities are typically issued to qualified institutional investors.

Question #4 of 73 Question ID: 415288

2 of 23

, Which of the following types of industries is typically characterized by stable performance during both expansions and contractions of the
business cycle?

6 A) Defensive.
/ B) Cyclical.
/ C) Growth.

Explanation

A defensive industry is typically characterized by stable performance during both expansions and contractions of the business cycle.

Question #5 of 73 Question ID: 415281

During the contraction phase of the business cycle, how will an active portfolio manager using an industry rotation strategy treat stocks of
companies in a cyclical industry?

/ A) Maintain the target weight of the industry.
/ B) Overweight the industry.
6 C) Underweight the industry.

Explanation

A cyclical industry is one that is expected to outperform during an expansion and underperform in a contraction. The industry rotation
strategy for a cyclical industry is to overweight during an expansion and underweight during a contraction.

Question #6 of 73 Question ID: 415275

The difference between a firm's balance sheet assets and liabilities is equal to the firm's:

/ A) market value of equity.
6 B) book value of equity.
/ C) intrinsic value of equity.

Explanation

Book value of equity is equal to balance sheet assets minus liabilities.

Question #7 of 73 Question ID: 434381

Which of the following statements about book value of equity is most accurate?

/ A) Increases in retained earnings decrease book value.
/ B) Book value of equity reflects the market's perception of the firm's prospects.
6 C) The primary goal of firm management is to increase the book value of the firm's equity.

Explanation

3 of 23

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