Learning Module 5 Company Analysis: Past and Present

Which two elements are typically included on the front matter of an initial company research report?

Which source is least likely to be an issuer-provided source used to determine a company's business model?

Warehouse Club Inc. sells its goods primarily through stores and requires customers to purchase an annual membership to shop. Which revenue driver decomposition is most logical for forecasting its net sales?

In a bottom-up revenue decomposition, which pair is the canonical volume and price drivers?

Which method is best to detect whether a retailer's reported sales growth is due to more stores or higher sales per store?

Which of the following best describes 'pricing power' in the context of company analysis?

For an issuer with mostly fixed operating costs and a positive contribution margin, what does a high degree of operating leverage imply?

Which ratio is the most direct measure of how long a company holds inventory before sale?

In Warehouse Club Inc.'s case study, membership fees account for a substantial share of operating profit. Which implication does this have for forecasting?

Which of the following is NOT a common method to estimate an issuer's industry size when many competitors are private?

Which concentration metric is calculated as the sum of the squares of competitor market shares and is commonly used by regulators?

In Porter’s Five Forces, which force assesses whether customers can force prices down or demand higher quality or services?

Which PESTLE factor would best capture government regulation imposing a minimum wage increase that materially raises store-level payroll costs?

A firm with the ability to charge premium prices because its customers strongly value distinct product features is pursuing which competitive strategy?

When forecasting gross margin for a commodity-sensitive manufacturer that has no hedging policy, which approach is most appropriate?

Which operating-cost classification is most useful for measuring operating leverage?

If a retailer has negative net working capital (current liabilities exceed current assets) and strong operating cash flow, what is the most likely implication?

Which metric is most appropriate to use when comparing company returns to the market’s required return on capital?

When forecasting maintenance capital expenditures (capex) for a manufacturing company, which proxy is most commonly used in practice?

Which of the following best describes a reasonable way to forecast a marketplace platform’s revenue?

Which scenario-analysis step is most important after building base-case financial forecasts?

When would an analyst prefer using a historical base-rate and convergence approach to forecast a firm's margins?

Which of the following best describes the difference between maintenance and growth capital expenditures?

An analyst computes DOL as 1.96 for a company. Which interpretation is most accurate?

Which statement best explains why analysts split revenues into recurring and non-recurring components?

Which item on the income statement is most commonly used as a starting point to estimate a company's maintenance capital expenditure?

An analyst sees an issuer's DCF valuation implying a required cost of equity markedly higher than the company's stated WACC. Which conclusion is most defensible?

Which combination of data is required to compute a company’s price-to-book ratio?

If a company increases debt to repurchase equity and return capital to shareholders, what immediate effect does this have on ROE, assuming operating profit and interest rates are unchanged?

Which statement most accurately describes the advantage of forecasting using drivers rather than only line-item history?

Which of the following items is most likely to be modeled as a summary measure instead of a detailed line-item forecast?

When reviewing a company with significant private-label sales sourced from contract manufacturers, which supplier-related risk is most relevant?

An analyst uses a peer average gross margin as a forecast for a target company that is a discount, high-volume retailer. Which critique is most valid?

Which of the following is the best reason to model days payable outstanding (DPO) explicitly in a working capital forecast?

Which of the following is a valid reason an analyst might reduce a retailer's forecasted SG&A percent of sales over time?

Which of the following best justifies the use of scenario analysis for a company in a technology-disrupted industry?

If an analyst forecasts a marketplace's third-party merchant GMV to grow faster than the platform's first-party retail sales, what's an important margin implication to check?

Which of the following is the primary reason an analyst would adjust reported net income to compute economic free cash flow?

Which of these items would you expect to be more reliable from management guidance for a company with strong internal control and historical accurate disclosures?

Which analytical step helps verify a bottom-up revenue forecast?

When is it most appropriate to use a company's historical DSO, DOH, and DPO as forecasts for future periods?

Which factor most reduces an analyst's confidence in management guidance?

Which of the following is a common limitation of third-party industry classification schemes (GICS, ICB, TRBC)?

Which single metric best captures short-term liquidity available from operating activities, excluding financing?

Which change would most likely lead to an increase in a mature retailer’s price-to-book ratio, all else equal?

Which of the following is a defensible way to incorporate management guidance into an analyst's forecasts?

Which of the following best describes why an analyst might compute counterfactual ROIC excluding cash balances (ROIC ex cash)?

Which of the following is the correct definition of the cash conversion cycle (CCC)?

Which statement about using depreciation as a proxy for maintenance capex is most accurate?

An analyst building scenarios for technology disruption should primarily vary which elements across bull, base, and bear cases?