Investment Analysis MCQs

50 min
Score: 0
Attempted: 0/50
Subscribe

1. What is the primary goal of investment analysis?
(A) To maximize consumption
(B) To evaluate risk and return for decision-making
(C) To minimize taxes only
(D) To ensure liquidity only

2. Which of the following is a fundamental analysis tool?
(A) Price chart patterns
(B) Moving averages
(C) Balance sheet examination
(D) Relative strength index

3. Technical analysis primarily studies:
(A) Company fundamentals
(B) Price movements and trading volumes
(C) Macroeconomic policies
(D) Management efficiency

4. What does diversification in investment help reduce?
(A) Systematic risk
(B) Unsystematic risk
(C) Inflation risk
(D) Market risk

5. Which of the following is considered a risk-free investment?
(A) Corporate bonds
(B) Treasury bills
(C) Mutual funds
(D) Equity shares

6. The CAPM model is used to calculate:
(A) Book value of assets
(B) Expected return on equity
(C) Dividend yield
(D) Company revenue growth

7. Beta in investment analysis measures:
(A) Total risk of a security
(B) Company profitability
(C) Volatility of a security relative to the market
(D) Dividend payout ratio

8. Which type of risk cannot be diversified away?
(A) Business risk
(B) Financial risk
(C) Market risk
(D) Liquidity risk

9. The price-to-earnings (P/E) ratio is an example of:
(A) Fundamental analysis ratio
(B) Technical indicator
(C) Liquidity ratio
(D) Solvency ratio

10. What does NPV stand for in investment appraisal?
(A) Net Price Value
(B) Net Profit Variable
(C) New Portfolio Valuation
(D) Net Present Value

11. If NPV of a project is positive, it indicates:
(A) The project should be rejected
(B) The project has no effect
(C) The project is profitable
(D) The project has zero risk

12. The Internal Rate of Return (IRR) is:
(A) The average return of equity shares
(B) The discount rate that makes NPV zero
(C) The inflation rate in an economy
(D) The highest rate of dividend paid

13. Which method considers the time value of money?
(A) Net present value
(B) Accounting rate of return
(C) Payback period
(D) Average return method

14. The efficient frontier in portfolio theory represents:
(A) Portfolios with maximum taxation
(B) Portfolios with maximum risk
(C) Portfolios with zero correlation
(D) Portfolios with minimum risk for a given return

15. Which of the following is an example of systematic risk?
(A) Strike in a company
(B) Management inefficiency
(C) Interest rate changes
(D) Product failure

16. A stock with a beta greater than 1 is:
(A) Less volatile than the market
(B) More volatile than the market
(C) Equally volatile as the market
(D) Risk-free

17. Dividend yield is calculated as:
(A) Dividend / Earnings per share
(B) Dividend / Book value
(C) Dividend / Net profit
(D) Dividend per share / Market price per share

18. A high P/E ratio generally indicates:
(A) Undervalued stock
(B) Low growth prospects
(C) Overvalued or growth-oriented stock
(D) Poor performance

19. The random walk theory suggests that:
(A) Stock prices follow predictable patterns
(B) Stock prices are influenced only by fundamentals
(C) Stock prices move randomly and cannot be predicted
(D) Stock prices depend only on dividends

20. Fundamental analysis consists of:
(A) Behavioral study of investors
(B) Price trend analysis only
(C) Volume analysis only
(D) Economic, industry, and company analysis

21. What does standard deviation measure in investment?
(A) Risk/volatility of returns
(B) Average return
(C) Market capitalization
(D) Dividend growth

22. Sharpe ratio is used to measure:
(A) Liquidity of an investment
(B) Return per unit of systematic risk
(C) Dividend yield
(D) Return per unit of total risk

23. Which portfolio offers the best risk-return trade-off?
(A) Efficient portfolio
(B) Minimum variance portfolio
(C) Random portfolio
(D) Over-diversified portfolio

24. What is meant by intrinsic value of a stock?
(A) Market price
(B) Book value
(C) Dividend declared
(D) True value based on fundamentals

25. Which ratio shows how much investors are willing to pay per dollar of earnings?
(A) Debt-equity ratio
(B) Return on assets
(C) Dividend payout ratio
(D) Price-to-earnings ratio

26. Which of the following is a technical analysis tool?
(A) Balance sheet analysis
(B) Trend lines and moving averages
(C) Dividend discount model
(D) Economic indicators

27. Which of the following is considered a leading economic indicator?
(A) GDP growth
(B) Inflation rate
(C) Stock market performance
(D) Corporate profits

28. Which valuation model assumes dividends grow at a constant rate?
(A) CAPM
(B) Dividend discount model (DDM)
(C) Arbitrage pricing theory
(D) Efficient frontier

29. What is the risk-return trade-off?
(A) Higher risk, lower return
(B) Lower risk, higher return
(C) Higher risk, higher potential return
(D) Risk and return are unrelated

30. Which of these is NOT part of portfolio analysis?
(A) Asset allocation
(B) Diversification
(C) Technical charting
(D) Risk-return assessment

31. Market capitalization of a company is calculated as:
(A) Price per share × Number of outstanding shares
(B) Price per share × Earnings per share
(C) Dividend per share × Earnings per share
(D) Book value × Equity shares

32. Which investment appraisal method ignores time value of money?
(A) Payback period
(B) IRR
(C) NPV
(D) Discounted cash flow

33. What is alpha in portfolio analysis?
(A) Return expected based on risk
(B) Volatility of a stock
(C) Risk-free rate of return
(D) Excess return over expected return

34. Which of these is a defensive stock?
(A) Luxury goods company
(B) Technology startup
(C) Utility company
(D) Automobile company

35. Which of the following ratios measures profitability?
(A) Current ratio
(B) Debt-equity ratio
(C) Price-to-book ratio
(D) Return on equity

36. Which method is best for comparing mutually exclusive projects?
(A) Net present value
(B) Accounting rate of return
(C) Payback period
(D) Cash flow method

37. What does the capital market line (CML) represent?
(A) Price trend line
(B) Risk-return trade-off for individual securities
(C) Dividend yield curve
(D) Risk-return trade-off for efficient portfolios

38. What does the security market line (SML) represent?
(A) Relationship between alpha and return
(B) Relationship between beta and expected return
(C) Relationship between P/E ratio and growth
(D) Risk-free return only

39. Which type of risk includes inflation and interest rate risk?
(A) Unsystematic risk
(B) Liquidity risk
(C) Default risk
(D) Systematic risk

40. Which ratio indicates how much of earnings are paid out as dividends?
(A) Return on equity
(B) Price-to-book ratio
(C) Dividend payout ratio
(D) Current ratio

41. What is meant by book value of equity?
(A) Assets minus liabilities
(B) Market price of shares
(C) Dividends plus retained earnings
(D) Earnings per share

42. Which measure is used to compare investment alternatives with different lifespans?
(A) Payback method
(B) Equivalent annual annuity
(C) Accounting return
(D) P/E ratio

43. Which of these is NOT a component of fundamental analysis?
(A) Industry analysis
(B) Economic analysis
(C) Chart pattern analysis
(D) Company analysis

44. Which of these measures liquidity position of a company?
(A) Current ratio
(B) P/E ratio
(C) Return on equity
(D) Debt ratio

45. Which ratio is used to measure financial leverage?
(A) Dividend yield
(B) Current ratio
(C) P/E ratio
(D) Debt-equity ratio

46. Which principle underlies modern portfolio theory?
(A) Investors should only hold risk-free assets
(B) Risk can be reduced but not eliminated
(C) Risk can be eliminated through diversification
(D) Returns are independent of risk

47. Which model explains asset prices using multiple factors?
(A) CAPM
(B) Dividend Discount Model
(C) Arbitrage Pricing Theory (APT)
(D) Efficient Market Hypothesis

48. Which of the following describes value investing?
(A) Buying overvalued stocks for short-term gain
(B) Buying undervalued stocks for long-term growth
(C) Investing only in government securities
(D) Trading stocks daily for profit

49. Growth investing focuses on:
(A) Companies with high dividend payout
(B) Companies with stable cash flow only
(C) Companies with low market capitalization
(D) Companies with high earnings growth potential

50. Which of these theories suggests markets quickly reflect all available information?
(A) Random walk theory
(B) Capital market theory
(C) Behavioral finance theory
(D) Efficient Market Hypothesis