Lecture VII
1. What is the random walk hypothesis?
Stock price movements are random and therefore unpredictable.
2. What is the efficient market hypothesis (EMH)?
Security prices fully reflect all available information.
3. Describe the weak EMH.
Stock pri

Lecture IV Review
1. There are two series of numbers, 20 numbers in each series. Each time a number is positive in
series A, it is negative in series B what the correlation coefficient between the two series is?
They are perfectly negatively correlated, t

Lecture IV Review
1. There are two series of numbers, 20 numbers in each series. Each time a number is positive in
series A, it is negative in series B what the correlation coefficient between the two series is?
They are perfectly negatively correlated, t

Lecture VI Review
1. Hope Financial Inc. Reported the following numbers for 2011: sales $140 million, net profit
margin 8.9%, shares outstanding 2.5 million. The stock currently trades at a 12 PE. In 2012, you
expected sales to grow 12%, net profit margin

LECTURE V REVIEW
1. What is the purpose of securities analysis?
The purpose of securities analysis is to ascertain the underlying value of securities by
understanding the past to hopefully understand the future of that security.
2. What does the statement

Lecture VI
The value of a share of stock is a function of tis future returns. Securities analysis is simply an
analysis of a companys past in order to project key financial variables into the future.
Common-size Income Statement takes every entry found on

Lecture 5/ Securities Analysis
Saturday, October 27, 2012
7:02 AM
I. Security Analysis
A. What is it?
Purpose of Security Analysis is to ascertain the underlying value of securities.
1. Determine which securities are under priced according to their under

Lecture 6/Stock Valuation
Saturday, October 27, 2012
9:03 AM
I.
Stock Valuation
A. What is it?
Security Analysis analyzes a company's past in order to predict key financial variable in
the future
Value of a share of stock is function of its future retur

IV
EPS = NET EARNING / # OF SHARES
EPS = (net profit after taxes- preferred dividends) /# of common s shares outstanding.
Dividend Yield = Annual dividends received per share / Current market price of the stock
Dividend Payout Ratio = Dividends per share

Lecture 4/ Correlation, Beta and Common Stocks
Friday, October 26, 2012
6:21 AM
I.
Correlation
A. What is it?
Correlation is a statistical measure of the relationship between two series of numbers
If the two series move in the same direction they are po

REVIEW FOR TEST
Lecture I
Security - Instruments issued by companies, governments or organizations that
represent a financial claim on the resources of the issuer.
Equity - 1. Ownership of a property. 2. The money value of a property or of an
interest in

Lecture V
What is the purpose of securities analysis?
The purpose of securities analysis is to ascertain the underlying value of securities by
understanding the past to hopefully understand the future of that security.
All publicly owned companies must pr

Investment test II sample problems
1. Company Zs 2011 EPS = $3.00 and its cash flow from operating activities = $2.25. What is
its cash realization ratio? How would you rate the quality of its earnings?
2. What are the 2010 accounts receivable turnover ra