NISM 15 Research Analyst Mock Test 11: 600 MCQ Series (Full Detailed Version)
NISM Series XV: Mock Test 11 (Set 11 of 24)
Dhaval’s Personal Advice for Aspirants:
Practice and understand these 25 questions. If you can't understand the theory or the logic, just mug it up (memorize it) because these are very important and sure-shot questions that will appear in the exam!
Q 1. Identify the statement which is most accurate?
Options:
A. Equity analyst have to pay special attention on understanding economic factors as market movements are largely driven by the economic factors
B. Equity analyst should not pay attention on economic or industry analysis as those outside factors are not under the control of a company
C. Equity analyst have to pay attention on industry and company factors but they need not consider broader economic conditions as its unpredictable
D. Equity analyst have to pay attention on analysing broader economy and also the industry as they affect the performance of the companies analysed
View Correct Answer & Detailed Explanation
Explanation: A complete study of company by an equity analyst will involve: 1. Economic analysis 2. Industry analysis 3. Company analysis. Therefore, while researching a company, the equity analyst need to focus his studies on the broader economy, the industry to which the company belongs and the company.
Q 2. The EV/EBITDA ratio of a company is 4. The company has reported an EBITDA of Rs. 180 crores. What is the value of equity if the net debt of the company is Rs. 310 crores.
Options:
A. Rs. 310 crores
B. Rs. 410 crores
C. Rs. 180 crores
D. Rs. 490 crores
View Correct Answer & Detailed Explanation
Explanation: EV/EBITDA = 4. EBITDA = Rs. 180 crores. EV = 180 x 4 = 720 crores. Enterprise Value = Value of Equity + Value of Debt. 720 = Value of Equity + 310. Value of Equity = 720 - 310 = Rs. 410 crores.
Q 3. As per the BCG Matrix, ________ is that segment of the market in which business is growing very strongly and the company has a large market share.
Options:
A. Dog
B. Question Mark
C. Star
D. Cash Cow
View Correct Answer & Detailed Explanation
Explanation: Stars: Segments in a business where market is growing rapidly and company is having a large market share. Cash Cows: Segments which require low cash infusion but steadily generate cash. Question Marks: Business segments in a fast growing market, but having low market share. Dogs: Business segments which have slow growth rates and intense competition.
Q 4. The unique parameter for evaluation of the business in hotel sector is ________ and for the retail sector is ________.
Options:
A. Net Room Income , Net profit margin
B. Average room tariffs , Foot falls and same store sales
C. Average Revenue Per User , Net profit margin
D. Average room tariffs , Net profit margin
View Correct Answer & Detailed Explanation
Explanation: Each sector has its own unique parameters for evaluation. For retail sector, foot falls and same store sales (SSS) are important. For banking it is Net Interest Income (NII)/Net Interest Margin (NIM). For telecom, it is Average Revenue Per User (ARPU) and for hotels, it is average room tariffs.
Q 5. Job of a research analyst involves ________.
Options:
A. Collection of data and its analysis
B. Interacting with companies
C. Interacting with clients
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: Research Analysts spend lot of time interacting with companies and others, accumulating data, analysing it and arriving at a decision on whether to buy, hold or sell a particular security/stock.
Q 6. ________ is NOT an objective of a research report.
Options:
A. To provide market perspective
B. To provide brief company analysis
C. To provide investment opportunities
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: A research report should provide a detailed company analysis and not a brief analysis. It should include details of company's business model, competitive advantage, opportunities and threats, company management competency, vision etc.
Q 7. Identify the benefit(s) of foreign direct investments (FDIs). A. New managerial skills B. Job creation C. Accessibility to traditional technology
Options:
A. Only A | B. Only C | C. Both A and B | D. Both B and C
View Correct Answer & Detailed Explanation
Explanation: FDI has multiple benefits: Job creation, New technologies, New managerial skills, New products and services. (FDI gets new technologies and not traditional technologies)
Q 8. Identify which of these is permitted under the research analyst code of conduct?
Options:
A. The performance rating of the Research Analyst is decided by the sales and trading team
B. There is a common supervisor of the sales and trading team and the Research Analyst
C. The employees in the sales team can give feedback to the Research Team on the research report
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: As per SEBI (Research Analyst) Regulations, 2014 - Regulation 18: Research analyst must be separate from sales/trading employees, but can receive feedback from sales or trading personnel to ascertain the impact of research report.
Q 9. Identify the factors likely to have most influence in the movement of commodity prices in the near term?
Options:
A. Inventory Cycle | B. Economic Cycle | C. Monetary Cycle | D. Secular Trend
View Correct Answer & Detailed Explanation
Explanation: Inventory cycles are short term cycles that occur within a commodity cycle. Inventory Cycle are highly influential in the near term. Changes in inventory levels directly affect supply and demand dynamics.
Q 10. Companies which have ________ will be ranked higher on ESG parameters.
Options:
A. Between 30% to 50% of directors as independent directors
B. Less than 30% of his directors as independent directors
C. Over 50% of directors as independent directors
D. No independent directors on their boards
View Correct Answer & Detailed Explanation
Explanation: Independent directors are a key component of good corporate governance. Having over 50% independent directors signals strong governance practices. SEBI mandates at least 50% independent directors for listed entities with a non-executive chairperson.
Q 11. In a particular industry, the four major companies have a total revenue of Rs. 2100 crores and they control 70% of the market. The balance 30% is in the hands of the unorganised sector. With this data, find out the approximate market size of this industry.
Options:
A. Rs. 3000 crores | B. Rs. 2750 crores | C. Rs. 3200 crores | D. Rs. 2800 crores
View Correct Answer & Detailed Explanation
Explanation: 70% of the market = Rs. 2100 cr. So 100% = 100 x 2100 / 70 = Rs. 3000 cr.
Q 12. The EBITDA % of a business is 60% and the Net Profit is 25% of EBITDA. The Earning Per Share (EPS) is Rs. 4 and the company has 30000 outstanding shares. Calculate the Sales of the business.
Options:
A. Rs. 7,00,000 | B. Rs. 6,50,000 | C. Rs. 5,00,000 | D. Rs. 8,00,000
View Correct Answer & Detailed Explanation
Explanation: Net Profit = 4 x 30000 = Rs. 1,20,000. EBITDA = 120000 x 100 / 25 = Rs. 4,80,000. Sales = 480000 x 100 / 60 = Rs. 8,00,000.
Q 13. The Risk Free rate is 6% and the Market Risk Premium is 8%. The Beta is 0.70. From this data calculate the Cost of Equity.
Options:
A. 11.60% | B. 7.40% | C. 9.50% | D. 13.25%
View Correct Answer & Detailed Explanation
Explanation: Cost of Equity = Risk Free Rate + Beta x Market Risk Premium = 6 + 0.70 x 8 = 6 + 5.6 = 11.6%
Q 14. As per Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, deemed to be connected person includes ________.
Options:
A. A holding / Subsidiary company | B. Company under the same management | C. Company under the same group | D. All of the above
View Correct Answer & Detailed Explanation
Explanation: As per SEBI, (Prohibition of Insider Trading) Regulations, deemed to be connected persons include: 'A holding company, subsidiary or associate company under the same management or group'.
Q 15. As per the SEBI standards of corporate governance, independent directors should constitute at least 75% of the board if the chairman is an executive director. State whether True or False?
Options:
A. True | B. False
View Correct Answer & Detailed Explanation
Explanation: SEBI regulation stipulates that independent directors should constitute at least 50% of the board if the chairman is an executive director. In all other cases, it requires 1/3rd of the board to be comprised of independent directors.
Q 16. In ________ bias, investors look for evidence of some other investors buying specific securities.
Options:
A. Gambler's fallacy | B. Confirmation bias | C. Herd Mentality | D. Anchoring
View Correct Answer & Detailed Explanation
Explanation: Herd mentality: This is a common behaviour disorder in investing community. This bias is an outcome of uncertainty and a belief that others may have better information, which leads investors to follow the investment choices that others make.
Q 17. If an auditor is unable to verify any part of the company's financials due to lack of data, the auditor can provide a ________.
Options:
A. Report with a disclaimer | B. Qualified report | C. Negative report | D. Non-confirmatory report
View Correct Answer & Detailed Explanation
Explanation: When an auditor is unable to obtain sufficient appropriate audit evidence due to lack of data or access, they may issue a report with a disclaimer of opinion. It means the auditor does not express an opinion on the financial statements.
Q 18. In which method is the national income measured as the aggregate income of individuals in the economy?
Options:
A. Product Method | B. Income Method | C. Expenditure Method | D. None of the above
View Correct Answer & Detailed Explanation
Explanation: National income can be measured through three methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method. In the Income method, national income is measured as the aggregate income of individuals in the economy.
Q 19. ________ gives a review of the company's sources and uses of cash over the year.
Options:
A. Income and Expense Statement | B. Cash Flow Statement | C. Working Capital Statement | D. Balance Sheet
View Correct Answer & Detailed Explanation
Explanation: Cash flow statement provides a summary of the various sources and uses of cash.
Q 20. Identify the factor(s) which contribute to economic recovery from recession.
Options:
A. Low interest rates | B. Low inflation | C. Both low interest rates and low inflation | D. Neither low interest rates nor low inflation
View Correct Answer & Detailed Explanation
Explanation: Low inflation enables central banks to loosen monetary policy and extend liquidity. Low interest rates motivate industries to get funds at cheaper rates which leads to increased productivity, jobs and income, leading to economic recovery.
Q 21. Which of the below mentioned actions is NOT included in the powers of Securities and Exchange Board of India (SEBI)?
Options:
A. To appoint the directors of Financial Intelligence Unit (FIU)
B. Suspend an officer of a SEBI registered Stock Broker
C. Impound and retain the proceeds or securities in respect of any transaction which is in violation of regulations
D. Suspend trading of a listed security on a recognised stock exchange
View Correct Answer & Detailed Explanation
Explanation: FIU is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.
Q 22. ________ is the right ratio which measures the effectiveness of management in generating returns to common share holders with its available assets.
Options:
A. Return on Assets (ROA) | B. Return on Equity (ROE) | C. PE ratio | D. Current Ratio
View Correct Answer & Detailed Explanation
Explanation: ROE measures the effectiveness of management in generating returns for common shareholders using the company's equity. ROE = Net Income / Shareholders' Equity. ROA includes both Equity + Liability, hence measures overall return to the firm.
Q 23. What are the important factor(s) for a research analyst while examining the quality of independent directors?
Options:
A. How many board meetings they are attending?
B. What is their relationship with the promoters?
C. What is their qualification and experience
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: Analysts should focus on the qualifications and experiences of independent directors, how many meetings they attend and what are their contributions to the business. They also have to see whether these directors are truly independent or are relatives and friends of the promoters.
Q 24. In a company the total assets are of Rs. 530000 and the total liabilities are of Rs. 410000. Calculate the Asset to Equity Ratio.
Options:
A. 3.83 | B. 7.19 | C. 4.41 | D. 5.44
View Correct Answer & Detailed Explanation
Explanation: Equity = Assets - Liabilities = 530000 - 410000 = 120000. Asset to Equity Ratio = Assets / Equity = 530000 / 120000 = 4.41.
Q 25. The current liabilities of a business are Rs. 60000, the inventory is Rs. 27000 and the Current Ratio is 2.5. Calculate the Quick Ratio.
Options:
A. 4.74 | B. 3.18 | C. 2.75 | D. 2.05
View Correct Answer & Detailed Explanation
Explanation: Current Assets = 60000 x 2.5 = 1,50,000. Quick Ratio = (Current Assets - Inventories) / Current Liabilities = (150000 - 27000) / 60000 = 123000 / 60000 = 2.05.
Mock Test 11 of 24 Complete. 275 questions mastered! Keep pushing!
Dhaval Visariya
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