- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 20. Equity Valuation: Applications and Processes
- Subject 2. Applications of Equity Valuation
CFA Practice Question
When an equity analyst tries to evaluate a company's common stocks, she should base her valuation estimations on (in full or in part):
II. Variables related to future prospects of the company.
III. The impact of a potential merger in the same industry.
IV. Stocks market prices in leading stock exchanges.
I. Fundamental analysis based on financial statements.
II. Variables related to future prospects of the company.
III. The impact of a potential merger in the same industry.
IV. Stocks market prices in leading stock exchanges.
Correct Answer: I, II and III
User Contributed Comments 7
| User | Comment |
|---|---|
| thalor | Why not IV? Wouldn't P/E ratio comparison be valid? |
| actiger | Why III? |
| giroth | I am pretty sure IV should be taken into account, as it is the value of the stock in the marketplace. |
| vi2009 | not IV because it should be key indices instead of general stock market prices. III because merger could cause an impact on stock valuation...it's in the corporate finance module. |
| arudkov | got me with q4((( |
| ba777 | On IV I assume they mean the company in questions stock and not just general stock prices. Is this correct. Also they use plural so are they referring to say a multi listed stock such as a dual listed NYSE and LSE and floats? Or couldn't it be different classes of common such as A and B with different voting rights. I'm not sure the point they are trying to make with this question. |
| shash0678 | Not IV since it mentions leading stock exchanges and not comparable stocks in the same market. A stock in market A (say NYSE) cannot be used as a comparable to value a similar stock in market B (say Germany) |