Securities Analysis and Valuation Flashcards
7 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Securities Analysis and Valuation flashcards as text
Yield to maturity (YTM) on a bond is best described as:
Answer: The total return anticipated if the bond is held until it matures
YTM is the total annualized return an investor will earn if the bond is purchased at its current price and held to maturity, accounting for coupon payments and capital gain or loss.
A bond's duration is primarily used to measure:
Answer: The bond's sensitivity to changes in interest rates
Duration measures a bond's price sensitivity to interest rate changes; a higher duration means greater price volatility when rates move.
In fundamental analysis, which financial ratio measures how efficiently a company uses its assets to generate revenue?
Answer: Asset turnover ratio
The asset turnover ratio (revenue ÷ total assets) indicates how effectively management uses the company's assets to produce sales.
A 50-day moving average crossing above a 200-day moving average is commonly known as a:
Answer: Golden cross
A golden cross occurs when a short-term moving average (e.g., 50-day) crosses above a long-term moving average (e.g., 200-day), which is considered a bullish signal.
EBITDA is most useful as a valuation metric because it:
Answer: Approximates operating cash flow by excluding non-cash and financing items
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) removes non-cash charges and financing structure effects, making it easier to compare operating performance across companies.
Which of the following best describes free cash flow (FCF)?
Answer: Operating cash flow minus capital expenditures
Free cash flow is calculated as operating cash flow minus capital expenditures, representing the cash a company can use for dividends, debt repayment, or reinvestment.
When performing relative valuation, an analyst compares a company's valuation multiples to those of its peers primarily to:
Answer: Identify whether the company appears over- or undervalued relative to similar firms
Relative valuation (comps analysis) benchmarks a company's multiples against industry peers to assess whether its current market price reflects a premium or discount.