Analyst forecasts which focus on a top-down approach to forecasting future performance are most likely paying attention to:A. Macroeconomic factors such as gross domestic product (GDP)B. Signals from individual companies within an industry firstOC. Microeconomic factors such as dividend yields on bio-technology stocks (shares)

Top down approach in fundamental analysis involves analysis of macroeconomic factors first, then…

Answered: Analyst forecasts which focus on a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Financial Forecasting Assumptions – Financial forecasting projects a firm’s future financial needs. There are various methods used for forecasting. Discuss the various forecasting methods and the assumption that underlie each method.
Consider the role of financial statement analysis in an efficient capital market, and review empirical evidence on the association between changes in earnings and changes in stock prices
discuss the critical issues invlove in implementing the dividend growth model approach and the security market line approach in computing the cost of equity of a firm
1. The more optimistic investors are about a company’s future profits, the ________ the ratio of the company’s market value to book value.greaterlowerno effect on
If the financial markets are competitive and complete, which ones of the following goals of a firm are equivalent? I. Earnings maximization II. Earnings per share maximization III. Share value maximization IV. Maximizing the utility of existing shareholders I and II Il and III II, II and IV IIlI and IV
How do managers, bankers, and security analysts use trend analysis, bench-marking, percent change analysis, and common size analysis?
To what extent would market timing be an effective strategy for a financial manager regarding high-income investors? Retirees? Please explain and ensure to add references and citations.
The idea that changes in dividend policy reflects managers' views about the firm's future earnings is known as: a) Modigliani and Miller Theory b) Payoff Theory c) Dividend Signaling Hypothesis d) Pecking Order Hypothesis
If you were an investor considering purchasing the stock of a company and you were concerned about the company's ability to produce income or operating success for a given period of time, which of the following trends would worry you most? O a decreasing inventory turnover ratio an increasing return on common stockholders' equity ratio O a decreasing return on assets ratio an increasing current ratio
Dividend policy may be affected by firm level as well as macroeconomic level factors. Select FIVE variables (at least 2 firm-level factors/variables and at least 2 macroeconomic factors/variables) from the list shown below. Explain and discuss the predicted impact of selected factors on dividend policy using relevant theories. i.e. what theories help to predict the positive or negative impact on the dividend payout and why. FIRM-LEVEL FACTOR/VARIABLE Asset growth rate Positive NPV investment opportunities Capital intensity of the production process Free cash flow generated Number of individual shareholders Relative tightness of ownership coalition Size of largest block holder MACROECONOMIC FACTOR/VARIABLE Transaction costs of security issuance Personal tax rates on dividend income Personal tax rates on capital gain Importance of institutional investors Corporate governance power of institutional investors Capital market, relative to intermediated (bank) financing
Which of the following statements is CORRECT? Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy and economies of scale exist. The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales. Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated. The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets
The.. value.. of.. an.. ordinary.. share..Select one or more:a. Will fall if future profit forecasts are higher than expectedb. Is always at its fundamental valuec. Can rise and fall along with market sentimentd. Will rise if a firm introduces some cost saving innovation

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