Quiz 18 Equity Research Questions and Answers
Question No 1
1. What do Equity Researchers do?
Answer: All of the above
Question No 2
2. Calculate Enterprise Value of the company if Market Capitalization is 100 Cr, Debt is 100 Cr and Cash in the books is 20 Cr?
Answer: 180 Cre
Enterprise Value = Market Value of Common Stock + Market Value of Debt– Cash & Investments = 100+100-20 = 180 Cr
Question No 3
3. The EPS of XYZ Ltd. is Rs 10 whereas the net profit margins are at 15%. The networth of the company is 100 Cr and no of shares are 4 Cr. D/E ratio is 2x. Calculate the ROE of the XYZ ltd.?
ROE= Net Income/Shareholders Equity EPS = Net Income/No. of Shares. Hence, Net Income = EPS X No. of Shares = Rs. 10 X 4 Cr = 40 Cr Shareholders Equity = Networth = 100 Cr ROE = 40 Cr/100 Cr = 40%
Question No 4
4. Which of the following listed companies in the telecom space are worst hit by the Supreme Court ruling on Adjusted Gross Revenues (AGR)?
Question No 5
5. The table represents the P/E Ratio of XYZ Ltd over the period 2012-2016.Which inferences cannot hold true?
Answer: XYZ has had a fantastic sales performance in the year 2016.
In the year 2016, P/E Ratio has fallen to 11.3, which indicates that investors are not willing to pay a higher price even for future growth. Lower EPS in 2016 also indicates slowing revenues. In 2014, the P/E was 29.75, which indicated that investors were willng to pay higher price, indicating that the industry was doing really well. Thus Options a and c are true, while option b is not true.
Question No 6
6. The use of financial leverage by a firm may be measured by the
Answer: Ratio of debt to total assets
Question No 7
7. Equity does NOT include
Question No 8
8. Calculate ROE of a firm with following details. Net Income is 10 Cr; Sales is 100 Cr, Sales/Assets is 3 and Assets/Equity is 20%.
ROE = (Net Income/Sales) X (Sales/Assets) X (Assets/Equity) ROE = (10/100 ) X 3 X 20 % = 6%