CFA Practice Question

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CFA Practice Question

A securities analyst is preparing a list of questions to ask when paying a personal visit to a company whose stock is publicly traded. Which of the following should not be on the list?

I. Does the company plan new financing, and if so, what kind?
II. What do you expect earnings per share to be for the full year?
III. Are new acquisitions being considered?
IV. What has been the firm's ratio of debt to equity over the past three years?
A. II and III
B. I and IV
C. IV only

User Contributed Comments 16

User Comment
kalps I am assuming this should not be asked as it should be known before the meeting.
Rguerra Is it alright to ask management what they believe will be the EPS for the full year? What if it is the very beginning of the year?
danlan The last one can be know from financial statement.
edcon Wouldn't asking about future acquisition plans be equivalent to asking for material non-public information and therefore not something mgt would be prepared to answer in any useful detail?
timbball whether the mgt chooses to answer in detail is another question
EtnicPlaymaker - Equity and debt are both BS items. They cannot be calculated "over a period".
- Asking for non-public and material information is not violation of the Standart. The USE of such information is violation.
achu I agree with "Asking for non-public and material information is not violation of the Standard. The USE of such information is violation."
Maciej25 Because this information D/E is already in the publicly available annual reports.
serboc ACHU:
I thought analyst were allowed to USE public, nonpublic, and nonmaterial information when doing calculating value on a firm or making recommendations to clients. Is that the Mosaic Theory?
reganbaha It's nonpublic-nonmaterial info. there is no 'and' in it.
bvides Got it...the last quest ASKS about PAST performance...All other are future questions...which is what you need...
shahzeb Where as the last question is something the analyst should already know, asking a question about future EPS or acquisitions/dispositions can classify as material information, if not already publically known, and hence can give the analyst unfair advantage.
CJPerugini To EtnicPlaymaker and achu you are both wrong. The standard says you should refrain from partaking in activities that could be perceived as a discredit to the CFA designation. You think the analyst is just visiting the company for fun?
hon132 The other questions, management can give a Trump-esque answer with disclosing anything nonpublic like earnings will be yuuuge or we'll have great acquisitions, the best acquisitions. Asking something you can find on your own doesn't add value to your position there.
unknown should not ask obvious questions.
nmech1984 if you like to lose credibility as an analyst, then ask. the reply will be "don't lose my time guy"
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