NISM-Series-XV - Research Analyst Certification Exam - 12

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Q 1. What are the major challenges in using the Free Cash Flow for Equity model (FCFE)?

a) Difficulty in estimating tax benefits on interest payments

b) Lack of clarity in determining capital expenditure

c) Objective estimation of net borrowings/repayments without an explicit debt policy

d) Inability to use for companies that pay substantial dividends

e) None of the above
 
Q 2. what information should be disclosed beforehand if there is any conflict of interest?

a) the analyst's personal life details

b) Any affiliations with competitors

c) the analyst's academic qualifications

d) Any financial interest, such as holding shares of the subject company

e) the analyst's preferred communication style
 
Q 3. What type of businesses, based on financial metrics, create wealth for shareholders/owners in the long run?

a) Businesses with low returns

b) Businesses with high debt

c) Businesses with high returns on capital/equity

d) Cyclical businesses

e) Businesses with high interest rates
 
Q 4. If a bond with a face value of $1,000 pays an annual interest of $60, what is its current yield if its current market price is $950?

A. 5.0%

B. 5.5%

C. 6.0%

D. 6.5%

E. 7.0%

 
Q 5. How are Equity Linked Debentures (ELDs) structured to provide returns to investors?

a) Only through fixed interest rates

b) Full capital protection and exposure to returns of equity

c) Without any credit risk

d) Exclusively through principal protection

e) Without any provision for equity participation
 
Q 6. In a market with a large number of sellers offering similar products/services, who can exert a lot of pressure and dictate prices?

a) Sellers

b) Consumers

c) Producers

d) None of the above

e) Regulators
 
Q 7. According to Seth Klarman, what is the limitation of Beta in assessing risk?

a) Beta considers specific business fundamentals

b) Beta accounts for economic developments

c) Beta incorporates the influence of investors on riskiness

d) Beta assumes equal upside potential and downside risk

e) Beta reliably predicts future investment performance
 
Q 8. What is the primary function of Underwriters in the primary market?

a) Holding funds and securities of institutional clients

b) Safeguarding security for large clients

c) Facilitating buy and sell transactions on stock exchanges

d) Providing settlement guarantees for trades

e) Subscribing to any portion of a public offer not bought by investors
 
Q 9. What is the primary advantage of having a strong promoter shareholder in a company?

a) This ensures compliance with tax regulations

b) It increases the likelihood of management acting in the best interest of shareholders

c) It lowers the remuneration of independent directors

d) It reduces auditor fees

e) It prevents unscrupulous related party transactions
 
Q 10. What is described as a creative process in the context of writing research reports?

a) Copy-pasting data.

b) Clarity of ideas.

c) Financial modeling.

d) Peer group analysis.

e) Access to exclusive information.
 
Q 11. What is the significance of Book Value in determining shareholder returns?

a) It determines the market price of shares

b) It represents the dividend declared by the company

c) It indicates the realizable value of assets

d) It is used in calculating the face value of shares

e) It provides an estimate of the value each share would receive in case of a wind-up
 
Q 12. What is included in the "Long Term Debt" on the liability side of the balance sheet?

a) Amount repayable towards borrowing due beyond one year

b) Mark-to-market losses arising from derivative contracts

c) Future obligation to be provided towards a revenue transaction that has already happened

d) Amount set aside for a liability that is yet to be fully quantified

e) Present value of lease payments payable
 
Q 13. Which regulatory authority oversees the insolvency process and professionals under the Insolvency and Bankruptcy Code 2016?

a) Reserve Bank of India (RBI)

b) Securities and Exchange Board of India (SEBI)

c) Ministry of Corporate Affairs

d) Insolvency and Bankruptcy Board of India (IBBI)

e) Pension Fund Regulatory and Development Authority (PFRDA)
 
Q 14. What assumption does YTM make about the investor?

a) the investor will sell the bond before maturity

b) the investor will hold the bond till maturity

c) the investor will reinvest coupons at different rates

d) the investor will not reinvest coupon payments

e) the investor will reinvest coupons at a decreasing rate
 
Q 15. What is the primary purpose of ratio analysis in financial statement analysis?

a) To confuse analysts with complex calculations.

b) Express one financial statement line item as a percentage or multiple of another.

c) To replace financial statements with simplified ratios.

d) To hide critical financial information.

e) To provide standalone insights without comparison.

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