AWMA Investment Strategies Test Questions with All Correct Answers
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Module
AWMA Investment Strategies
Institution
AWMA Investment Strategies
AWMA Investment Strategies Test Questions with All Correct Answers
What methods of analysis did Graham use? - Answer analysis of a company's net current assests, debt-to-equality ratio, dividend record, earnings growth, and price relative to net current assets.
List several characteristics of...
AWMA Investment Strategies Test
Questions with All Correct
Answers
What methods of analysis did Graham use? - Answer ✔ analysis of a company's net
current assests, debt-to-equality ratio, dividend record, earnings growth, and price
relative to net current assets.
List several characteristics of growth stocks - Answer ✔ high profet margins, earnings-
per-share growth of 15% or more, sales and earnings highly independent of the general
economy, small dividends if any, distinctive products or services, above-average price
to earnings ratios (as much as two to four times that S&P 500 stocks), high price to
book value ratios, high betas, high expectations for continued growth by the
invesstments community
Identify the atributes of each of the following stages of corporate growth - Answer ✔ a.
development (in this stage a new firm begins to take shape around specific product or
service; finanincial losses are typical), growth (in this stage sales and earnings increase
at the most rapid rate. stock prices are bid up and P/E ratios expand in anticipation of
continued growth in earnings), maturity (competitors are drawn to the market. As a
result, the innovator increases its marketing budget and cuts prices, key employees are
often lured away to top-management positions with competitors, revenue growth slows
down, profit growth slows down, and margins may even decline), decline (products
become standardized and competition shifts from innovation to low-cost production.
Substitute products invade the market and revenues and profits decline)
List characteristics of growth stocks according to T. Rowe Price. - Answer ✔ a. superior
ability to develop products, b. the absesnse of cutthroat compretition, c. no heavy
handed governmental regulation, d. low total labor costs, e. high profit margins, f.
superior rate of earnings growth, g. a return on invested capital of at least 10%, h.
earnings that reach higher peaks with each full economic cycle
What is the small firm effect? - Answer ✔ Small firms provide a much higher level of
return than do large company stocks.
List several elements of a small stock strategy. - Answer ✔ a. have a long time horizon,
b. be prepared to live with volatility, c. diversity the small stock portion of your portfolio
to include between 20 to 30 different issues, d. acquire shares over time, e. be aware
that transaction costs for small firms are high so avoid turning over more than 30% of a
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