NISM 15 Research Analyst Mock Test 2: 600 MCQ Series (Full Detailed Version)
NISM Series XV: Mock Test 2 (Set 2 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 26. Calculate the SALES of a business if : EBITDA % of a business is 40%. Net profit is 20% of EBITDA. Dividend per share is Rs. 2 and the dividend payout ratio is 40%. The number of outstanding shares are 10000.
Options:
A. Rs 480000
B. Rs 574000
C. Rs 625000
D. Rs 755000
View Correct Answer & Detailed Explanation
Explanation: Dividend paid per share is Rs. 2 and the number of outstanding shares are 10,000. So the total dividend paid is Rs. 2 X 10,000 = Rs. 20,000. The Dividend Payout ratio is 40%. This means Rs 20000 paid as divided is 40% of the Net Profit. So the Net Profit is Rs. 50000 ( 20000 / 40 x 100 ). The Net Profit is 20% of EBITDA. Rs 50000 is the Net Profit. So the EBITDA will be 50000 / 20 X 100 = 250000. EBITDA is 40% of the business ie Sales. EBITDA is 250000. So Sales will be 250000 / 40 X 100 = 625000.
Q 27. XYZ Ltd. has Return on Capital Employed (ROCE) of 40% and Return on Equity (ROE) of 25%. The Net Profit is at Rs. 2,00,000 and the EBIT is at Rs. 4,00,000. Calculate the debt level in this business.
Options:
A. Rs. 2,00,000
B. Rs. 5,00,000
C. Rs. 7,50,000
D. Rs. 4,75,000
View Correct Answer & Detailed Explanation
Explanation: ROCE = EBIT / Capital Employed. 40% = 4,00,000 / Capital Employed. Capital Employed = 400000 / 0.4 = Rs. 10,00,000. ROE = Net Profit / Share Equity. 25% = 2,00,000 / Share Equity. Share Equity = 200000 / 0.25 = Rs. 8,00,000. Debt = Total Capital Employed - Share Equity = 10,00,000 - 8,00,000 = Rs. 2,00,000.
Q 28. Unfair trade practice excludes :
Options:
A. Active concealment
B. Publicly known information
C. Willful mis statement
D. Misleading info
View Correct Answer & Detailed Explanation
Explanation: Some of the instances of unfair trade practices cited in the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulation, 2003 are as follows: a) A willful misrepresentation of the truth or concealment of material fact in order that another person may act, to his detriment b) A suggestion as to a fact which is not true, by one who does not believe it to be true c) An active concealment of a fact by a person having knowledge or belief of the fact d) A promise made without any intention of performing it e) A representation, whether true or false, made in a reckless and careless manner. Publicly know information is not a unfair trade practice.
Q 29. Which method measures national income as the aggregate income of individuals in the economy?
Options:
A. Income Method
B. Product Method
C. Expenditure Method
D. None of the above
View Correct Answer & Detailed Explanation
Explanation: National income of an economy 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 30. The Market Capitalisation of a firm is Rs 1 lakh and it has a total debt of Rs 30,000. The cash in hand is Rs 5000. What is the Enterprise Value of the firm ?
Options:
A. Rs. 1,00,000
B. Rs. 1,35,000
C. Rs. 1,25,000
D. Rs. 65,000
View Correct Answer & Detailed Explanation
Explanation: Enterprise value (EV) = Market value of equity (Market capitalization) + Market value of debt – cash and cash equivalents. EV = 1,00,000 + 30,000 - 5000 = Rs. 1,25,000.
Q 31. Which of the following individuals is entitled to sell an asset at a fixed pre-determined price?
Options:
A. A Call Buyer
B. A Put Buyer
C. A Call Writer
D. A Put Writer
View Correct Answer & Detailed Explanation
Explanation: A Put option gives the Buyer the right (but not the obligation) to sell an asset at a predetermined price (called the strike price) within a specified time. Lets analyse all the options : Call Buyer : Has the right to buy at a fixed price. Put Buyer : Has the right to sell at a fixed price. Call Writer (seller) : Has the obligation to sell if exercised, not the right. Put Writer (seller) : Has the obligation to buy if exercised, not the right.
Q 32. Identify the statement which correctly describes a Business life cycle.
Options:
A. All businesses complete the three stages of the business life cycle within a 100-year time frame
B. The life cycle stages occur at regular, predictable times for all businesses
C. The duration of each stage of a business life cycle is not fixed and some businesses may not go through every stage
D. All stages of a business life cycle are experienced by every business, though their lengths can differ.
View Correct Answer & Detailed Explanation
Explanation: Business life cycle refers to the various stages through which a business transitions through its journey from its emergence till its eventual decline. Every industry typically goes through - Pioneering stage, Growth stage, Matured stage, Declining stage, Reinvention and revival. However, in reality not all businesses go through every phase. Some companies may skip phases due to rapid innovation, acquisitions, or market shifts. Also the duration of each phase varies widely depending on industry, innovation, competition, management, and external factors. It does not follow a fixed or predictable timeline.
Q 33. The book value of a company's assets is Rs 8000 crores, and its total liabilities amount to Rs 3000 crores. If the company's market capitalization is Rs 11,000 crores, what is its Price to Book Value (P/B) ratio?
Options:
A. 2.2x | B. 4.4x | C. 1.6x | D. 3x
View Correct Answer & Detailed Explanation
Explanation: To calculate the Price-to-Book Value (P/B) Ratio, we use the formula: P/B Ratio = Market Capitalisation / Book Value of Equity Step 1: Calculate Book Value of Equity Book Value of Equity = Assets - Liabilities = 8000 - 3000 = Rs. 5000 crores Step 2: Calculate P/B Ratio P/B Ratio = Market Capitalisation / Book Value of Equity = 11000 cr / 5000 cr = 2.2x
Q 34. A company has a Return on Equity (ROE) of 16%, Return on Capital Employed (ROCE) of 20%, Net Profit of Rs. 1,60,000, and EBIT of Rs. 2,50,000. If the company pays 10% annual interest on its debt, what is the total interest paid during the year?
Options:
A. Rs. 18500 | B. Rs. 25000 | C. Rs. 31000 | D. Rs. 36500
View Correct Answer & Detailed Explanation
Explanation: Step 1: Use Return On Equity (ROE) to find Equity ROE = Net Profit / Equity So Equity = Net Profit / ROE = 1,60,000 / .16 = Rs 10,00,000 Step 2: Use Return On Capital Employed (ROCE) to find Capital Employed ROCE = EBIT / Capital Employed So Capital Employed = EBIT / ROCE = 2,50,000 / 0.2 = Rs 12,50,000 Step 3: Use Capital Employed and Equity to find Debt Capital Employed = Equity + Debt Therefore Debt = Capital Employed - Equity = 12,50,000 - 10,00,000 = Rs 2,50,000 Step 4: Calculate Interest at 10% Interest = 10% of Debt = 0.10 x 250000 = Rs. 25,000
Q 35. A company has a net income of Rs. 360,000 and 6,00,000 outstanding shares. The Return on Equity (ROE) is 20%, and the book value per share is 25% of the market price. What is the market price per share?
Options:
A. Rs 20 | B. Rs 9 | C. Rs 12 | D. Rs 10
View Correct Answer & Detailed Explanation
Explanation: Step 1: Calculate Earnings Per Share (EPS) EPS = Net Income / No. of Shares = 360000 / 600000 = Rs 0.60 Step 2: Use Return on Equity (ROE) to find Book Value per Share ROE = EPS / Book value per share 0.20 = 0.60 / Book value per share Book value per share = 0.60 / 0.20 = Rs. 3 Step 3: Use the relationship between Book Value and Market Price Book Value = 25% of Market Price 3 = 0.25 x Market Price Market price = 3 / 0.25 = Rs 12
Q 36. Which of the following actions by a company are purely accounting in nature and have no tangible effect on shareholders?
Options:
A. Stock Split | B. Bonus Issue | C. Stock Consolidation | D. All of the above
View Correct Answer & Detailed Explanation
Explanation: The above mentioned corporate actions are book entry adjustments, meaning they do not change the total value of a shareholder's holding, only its structure. Stock Split - Increases the number of shares by splitting existing ones, reducing the share price proportionally. The total value is unchanged. Bonus Issue - Additional shares are issued to shareholders for free. Share price adjusts accordingly; total investment value remains the same. Stock Consolidation (Reverse Stock Split) - Reduces the number of shares while increasing the share price proportionally. No change in total value of investment.
Q 37. Which of the following activities falls within the professional scope of a research analyst when serving clients?
Options:
A. Portfolio management for clients
B. Recommending whether to buy or sell specific securities
C. Offering advice to the clients on capital gains tax for personal investments
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: A stock research analyst primarily provides investment research and recommendations but does not directly manage investments or offer personal tax advisory services. The analyst primarily provides research-based insights and investment recommendations, such as whether to buy, hold, or sell a particular security, sector or market trend analysis etc.
Q 38. Calculate the Earnings Yield of a company with market capitalization of Rs 15 lakhs and net profits of Rs 3 lakhs.
Options:
A. 10% | B. 20% | C. 50% | D. 100%
View Correct Answer & Detailed Explanation
Explanation: Earnings Yield = ( Net Profit / Market Capitalization ) × 100 Given: Market Capitalisation = Rs. 15,00,000, Net Profit = Rs. 3,00,000. Earnings Yield = (3,00,000 / 15,00,000)× 100 = 0.2 x 100 = 20%
Q 39. Which of the following items is included under Capital Account transactions in the balance of payments?
Options:
A. Imports | B. Exports | C. Foreign Direct Investments | D. All of the above
View Correct Answer & Detailed Explanation
Explanation: In the balance of payments, imports and exports are part of the current account because they relate to trade in goods and services. Capital account transactions involve changes in assets or liabilities, such as foreign direct investment, portfolio investment, or external borrowings. Foreign Direct Investment (FDI) is a key component of the capital account because it involves cross-border investments in businesses, infrastructure, and financial assets.
Q 40. A low Price-to-Book value ratio typically suggests which of the following?
Options:
A. Assets might be available at a lower / cheaper than market price
B. The company's assets are overpriced
C. The company is generating strong profits
D. The P/B ratio is irrelevant for valuation
View Correct Answer & Detailed Explanation
Explanation: The Price-to-Book ratio compares a company's market price per share to its book value per share. The book value essentially represents the company's net assets (total assets minus total liabilities). Price to Book Value (P/B) Ratio = Market Price per Share / Book Value per Share. A low P/B ratio suggests that a company's stock is trading below its book value, meaning its assets might be undervalued or available at a discount.
Q 41. Under SEBI regulations, no person shall act as a Research Analyst or present themselves as one unless they have obtained a ________.
Options:
A. Certificate of internship | B. Certificate of practice | C. Certificate of registration | D. Certificate of approval
View Correct Answer & Detailed Explanation
Explanation: Under SEBI (Research Analysts) Regulations, no person can act as or represent themselves as a research analyst without obtaining a certificate of registration from SEBI. This ensures that analysts meet prescribed qualifications, follow a code of conduct, and maintain transparency and accountability in their research reports.
Q 42. If an industry has strong entry barriers and does not face the risk of new competitors entering, how would investors/owners generally view such an industry?
Options:
A. Attractive | B. Unattractive | C. Growing | D. Not an important factor in investment decisions
View Correct Answer & Detailed Explanation
Explanation: If an industry has high entry barriers (like patents, large capital needs, or strong brand loyalty), new competitors cannot easily enter. This reduces competitive pressure and protects existing players' profits. For investors and owners, such an industry is considered attractive, since it offers stability and sustained returns without constant threat of new entrants.
Q 43. When a region is expected to experience rainfall below its long-term average during a particular year, which of the following effects may occur?
Options:
A. An improvement in the quality of crops from rainfed regions
B. A reduction in prices of crops cultivated on rainfed land
C. An increase in demand for rainfed crops
D. A decrease in yields of crops grown in rainfed areas
View Correct Answer & Detailed Explanation
Explanation: Rainfed crops depend directly on rainfall for their growth. If rainfall is lower than the long-term average, the soil gets less water, which reduces crop productivity. This leads to lower yields.
Q 44. Why is it important for research analysts to pay attention to the independent directors of a company?
Options:
A. Independent directors help expand the company's business network and facilitate partnerships
B. Independent directors significantly enhance the profitability of the company
C. Promoter directors may lack integrity in the absence of independent directors
D. Promoters may sometimes nominate familiar individuals as independent directors to control decisions
View Correct Answer & Detailed Explanation
Explanation: Research Analysts must closely examine independent directors because promoters sometimes appoint acquaintances under this label, reducing true independence. Such appointments can allow promoters to dictate terms and weaken governance. Independent directors are meant to safeguard minority shareholders and ensure unbiased oversight.
Q 45. According to Dow Theory, which of the following statements represent its core tenets?
Options:
A. The market shows three types of trends
B. Trading volume supports and confirms the trend
C. Market indices must confirm one another
D. All of the above
View Correct Answer & Detailed Explanation
Explanation: Dow Theory is one of the oldest principles of technical analysis. It says the market has three trends: primary (long-term), secondary (intermediate-term corrections), and minor (short-term fluctuations), that volume supports and confirms the trend (strong moves should be backed by high volume), and that different indices must confirm each other.
Q 46. In which of the following corporate actions is the expression "Share Swap" typically used, when the acquiring entity issues its own shares as consideration for acquiring another company?
Options:
A. Spin-off | B. Loan restructuring | C. Scheme of arrangement | D. Merger or acquisition
View Correct Answer & Detailed Explanation
Explanation: A share swap happens when the acquiring company issues its own shares to the shareholders of the target company instead of paying cash. This is commonly used in mergers and acquisitions, as it allows the buyer to purchase the business without immediate cash outflow. Shareholders of the target company receive shares of the acquiring company in exchange for their shares.
Q 47. In the context of the Average Directional Index (ADX), buy signals are generated based on the interaction of +DMI and -DMI. Which of the following statements is correct?
Options:
A. When -DMI crosses +DMI from below and the ADX is rising, it generates a buy signal
B. When +DMI crosses -DMI from below and the ADX is rising, it is considered a buy signal
C. When +DMI and -DMI meet and the ADX is rising, it signals a buy
D. When +DMI crosses -DMI from above, it indicates a buy signal
View Correct Answer & Detailed Explanation
Explanation: The Average Directional Index (ADX) measures the strength of a trend, while +DMI shows upward movement and -DMI shows downward movement. A buy signal occurs when +DMI moves above -DMI (crosses from below), meaning buyers are stronger than sellers and if ADX is rising, it confirms that the trend is gaining strength.
Q 48. The Graded Surveillance Mechanism (GSM) is primarily aimed at which category of securities?
Options:
A. Large-cap stocks | B. Securities with small market capitalisation | C. Securities with high trading liquidity | D. All of the above
View Correct Answer & Detailed Explanation
Explanation: The Graded Surveillance Measure (GSM) is introduced by stock exchanges to monitor and control excessive volatility in certain stocks. It is mainly targeted at low market capitalisation stocks or networth where the valuation is not commensurate with the business fundamentals. These stocks are more prone to price manipulation and abnormal movements.
Q 49. Which of the following represents a barrier to entry for new companies in an industry?
Options:
A. Skills and competence required from employees | B. Obtaining licenses | C. High initial capital requirements | D. All of the above
View Correct Answer & Detailed Explanation
Explanation: Entry barriers are obstacles that make it difficult for new firms to enter an industry. Required competence/skill: Specialized knowledge is essential. Licensing: Regulatory approvals restrict entry. Required capital: High initial investment discourages new players.
Q 50. Which of the following is NOT typically used as a validation technique when applying channels and trendlines in technical analysis?
Options:
A. Use of candlestick formations | B. Confirmation through trading volume | C. Price confirmation | D. Use of technical indicators like RSI and MACD
View Correct Answer & Detailed Explanation
Explanation: Validation techniques refer to the methods used to confirm whether a technical analysis signal is reliable. Validation Techniques are Volume Confirmation, Candlestick Patterns, Indicators (RSI, MACD), and Multi-Timeframe Alignment. Trendlines and channels are drawn using price itself, so price movement is already part of their construction. Because of this, "Price Confirmation" is not a separate validation technique.
Mock Test 2 of 24 Complete. Continue practicing to ace the exam!
Dhaval Visariya
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