NISM Series - XV Research Analyst Cert. Mock Test - 2/50 Oops!Time Out NISM Series – XV Research Analyst Cert. Mock Test – 2 1 / 50__________ is probably part of Other Comprehensive Income. a) Gain/(losses) arises on account of translation of financial statement of foreign operations b) Mark to market gain in the value of equity investment in a foreign company c) Mark to market gain on derivative contracts purchased for trading purpose only d) All of the above Your answer is IncorrectYour answer is correctExplanation:Other comprehensive income (OCI): Other comprehensive income refers to income or expense that are required or permitted to by-pass profit and loss account. It mostly comprises of change in value of assets and liabilities on account of non-operating factors. They include the following: – Changes in revaluation surplus – Re-measurement gain/(loss) on defined benefit plans – Gain/(losses) arises on account of translation of financial statement of foreign operations – Changes in fair value of financial assets or liabilities that are accounted through OCI – Gain/(loss) on account of derivative contracts that effectively hedge risk.2 / 50The special measure for assessing a business in the hotel sector is ________, and for the retail sector, it is ________. a) Net Room Income , Net profit margin b) Average room tariffs , Net profit margin c) Average room tariffs , Foot falls and same store sales d) Average Revenue Per User , Net profit margin Your answer is IncorrectYour answer is correctExplanation:Each sector has its own unique parameters for evaluation. For the retail sector, footfalls and same-store sales (SSS) are important parameters, whereas 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, etc.3 / 50When a father-in-law transfers a house property to his daughter-in-law without sufficient payment, and she rents it out, the taxable rent is in the hands of _______. a) Mother-in-law b) Daughter-in-law c) Father-in-law d) Son Your answer is IncorrectYour answer is correctExplanation:If a property is transferred to a spouse, minor child etc., without adequate compensation, it is not valid. The transferor is the deemed owner and income from property is taxable in his hands.As per section 64(1)(vi) of Income Tax Act, if an individual transfers his/her asset to his/ her son’s wife otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor being father-in-law/mother-in-law).4 / 50Under which Act or Regulation are Treasury Bills, Bonds, and Shares considered as ‘securities’? a) SEBI (Fraudulent and Unfair Trade Practices relating to securities market) regulation b) Securities and Exchange Board of India Act c) SEBI (Prohibition of insider trading) Regulations d) Securities Contract (Regulation) Act Your answer is IncorrectYour answer is correctExplanation:The term “securities” has been defined in the Section 2(h) of Securities Contracts (Regulation) Act, 1956(SCRA).‘Securities’ include: Shares, scrips, stocks, bonds, debentures, Government securities, derivatives etc.5 / 50The work of a research analyst includes ________. a) Interacting with clients b) Collection of data and its analysis c) Interacting with companies d) All of the above Your answer is IncorrectYour answer is correctExplanation:Analysis and decision making process is a combination of understanding qualitative factors that affect operational performance, such as efficiency of operations, competitiveness, business plans and work ethics of the management among others and quantitative factors such as revenues, costs, profitability and risks to these financials.Therefore, Research Analyst’s 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/stock6 / 50Spot the risk linked to a situation where falling interest rates cause a decrease in cash flow because reinvesting principal and interest payments is done at lower interest rates. a) Re-Investment Risk b) Political Risk c) Interest Rate Risk d) Credit Risk Your answer is IncorrectYour answer is correctExplanation:Re-investment risk arises from the probability that income flows received from an investment may not be able to earn the same interest as the original interest rate. The risk is that intermediate cash flows may be reinvested at a lower return as compared to the original investment.The rate at which the re-investment of these periodic cash flows is made will affect the total returns from the investment. The reinvestment rates can be high or low, depending on the levels of interest rate at the time when the coupon income is received.7 / 50The company’s Net Profit is Rs 20 crores, and its equity capital is Rs 3,44,81,540 with no preference shares issued. The face value of its shares is Rs 10. What is the Earning Per Share (EPS)? a) Rs. 58 b) Rs. 47.22 c) Rs. 63.74 d) Rs. 79.51 Your answer is IncorrectYour answer is correctExplanation:EPS = Net Profit / No. of SharesFirst let’s calculate the number of shares.Number of Shares = Equity Capital / Face Value= 3,44,81,540 / 10= 34,48,154EPS = Net Profit / No. of Shares= 20,00,00,000 / 34,48,154= 58.008 / 50What makes inflation go up a lot? a) Strengthening of local currency b) Increase in foreign exchange reserves c) Higher interest rates d) None of the above Your answer is IncorrectYour answer is correctExplanation:Substantial Increase in foreign exchange reserves will influence the monetary policy by increase money supply and increase in money supply leads to inflation. This excess liquidity creates some inflationary pressure(Increase in international reserves also had a profound effect on the structure of world inflation. The increase in demand expansion triggered by the monetary expansion results in a sharp increase in the demand for traded commodities because the increase in international reserves had eliminated or substantially reduced the foreign exchange constraint in many countries. Consequently, the foreign trade sector became the leading sector in inflation)9 / 50One goal of SEBI regulations is to ________. a) Protecting interest of investors b) Securing steady returns for the investors c) Prevention of volatility in markets d) All of the above Your answer is IncorrectYour answer is correctExplanation:The Preamble of the SEBI Act describes the basic functions of SEBI : “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”Thus, SEBI’s primary role is to protect the interest of the investors in securities and to promote the development of and to regulate the securities market.10 / 50The company needs to disclose ‘Related Party Transactions’ because ________. a) The shareholders should be aware that the company can sell its goods and services outside their close network b) The shareholders are assured that related party transactions are done only with related parties and not with un-related parties c) It's is as per SEBI's KYC rules and regulations d) The shareholders should know if such related party transactions are enriching some promoters or shareholders at the cost of other shareholders Your answer is IncorrectYour answer is correctExplanation:While analysing a company, the analyst has to check its Corporate governance standards.Related party transactions form a part of corporate governance standards. It is important to prevent unscrupulous related party transaction that can enrich promoter group or other majority shareholders at the cost of minority shareholders. Ideally all material related party transactions should be presented to the audit committee for pre-approval.11 / 50Which is the central bank in India with the responsibility of administering the monetary policy? a) Reserve Bank of India b) Central Bank of India Explanation:The Reserve Bank of India (RBI) is the central bank responsible for formulating and administering monetary policy in India.12 / 50Unhealthy practice in the Securities Markets includes which of the following? a) Transparency b) Insider Trading Explanation:Unhealthy practices in securities markets involve activities like insider trading, which is the use of non-public information for trading, leading to unfair advantages.13 / 50Which authority was set up with the primary responsibility of promoting old age income security by establishing, developing, and regulating pension funds? a) Insurance and Regulatory Development Authority b) Pension Fund Regulatory Development Authority Explanation:Pension Fund Regulatory and Development Authority (PFRDA) is responsible for regulating pension funds and promoting old age income security.14 / 50The major influencer(s) of public policies in an economy is/are a) Government b) Central Bank c) Both the above Explanation:Both the government and the central bank play significant roles in influencing public policies in an economy.15 / 50What is the earnings yield, if the price of a stock is Rs. 195 and EPS is Rs. 13? a) 4.67 percent b) 5.67 percent c) 6.67 percent Explanation:Earnings Yield is calculated as (EPS / Price) * 100. In this case, (13 / 195) * 100 = 6.67 percent.16 / 50Face value is the nominal value of a security stated by the issuer. a) True b) False Explanation:Face value is the nominal or par value of a security, as stated by the issuer.17 / 50How is the price to earnings ratio calculated? a) Earnings Per Share (EPS) / Current price of stock b) Current price of stock / Earnings Per Share (EPS) Explanation:Price to Earnings Ratio (P/E) is calculated by dividing the current market price of a stock by its earnings per share (EPS).18 / 50Calling feature in bonds is most prevalent when interest rates are expected to ________. a) Fall b) Rise Explanation:The calling feature is often used by bond issuers when interest rates are expected to fall, allowing them to refinance at a lower rate.19 / 50A convertible debenture is a type of loan issued by a company that can be converted into stock. a) True b) False Explanation:Convertible debentures are indeed a form of debt that can be converted into equity shares at a later date.20 / 50A global depositary receipt or GDR is a bank certificate issued in more than one country for shares in a foreign company. a) True b) False Explanation:GDRs are certificates representing shares in a foreign company and are traded on international stock exchanges.21 / 50__________ bias can prevent investors from benefiting from market corrections. a) Projection b) Herd Mentality c) Anchoring d) Confirmation Explanation:Herd mentality bias refers to the tendency of investors to follow the crowd, even if it goes against rational decision-making.22 / 50Business risk is also known as operating risk because this risk is caused by factors that affect the operations of the company. a) True b) False Explanation:Business risk, or operating risk, arises from factors that impact a company’s day-to-day operations.23 / 50Dividend is a small component of the total returns from equity. a) True b) False Explanation:While dividends contribute to returns, they are just one part; capital appreciation is another significant component of total returns.24 / 50Which of the following measures the ability of the company to satisfy its short-term obligations as and when they come due? a) Current Ratio b) High Return on Equity Explanation:The Current Ratio assesses a company’s ability to meet its short-term liabilities using its short-term assets. A higher current ratio indicates better short-term liquidity. High Return on Equity is a profitability measure, not a liquidity measure.25 / 50Which section in the Cash Flow statement will provide the information about the amount of funds that a company borrowed during the preceding year? a) Investment Cash Flows b) Financing Cash Flows Explanation:Financing Cash Flows in the Cash Flow statement details the funds obtained or repaid through activities such as borrowing, issuing stock, or paying dividends.26 / 50Which of the following items are found in an income statement? a) Inventory b) Long term debt c) Accounts Receivables Explanation:Inventory is typically included in the cost of goods sold section of the income statement, representing the cost of goods sold during a specific period.27 / 50If a stock has exceeded its Target Price, an analyst may recommend __________. a) Buy b) Sell c) Hold Explanation:If a stock has surpassed its target price, an analyst may recommend selling, as the expected gains may have been achieved.28 / 50Which of the following is not a valuation parameter for business analysis? a) P/BV Ratio b) P/E Ratio c) Demand & Supply of Securities in the market Explanation:Demand and supply of securities is not a direct valuation parameter but is crucial for market dynamics.29 / 50For analysts, which is the authentic source to check facts on a Company? a) Annual Reports b) Media reports c) Business Portals Explanation:Annual reports are considered a reliable source for analysts to gather authentic information about a company.30 / 50Leverage ratio is a part of __________ parameter of business analysis. a) Quantitative b) Qualitative Explanation:Leverage ratio falls under the quantitative parameters of business analysis, involving numerical data.31 / 50Who can exert a lot of pressure and dictate prices, if there are a large number of sellers with similar products/services? a) Consumers b) Producers Explanation:In a competitive market with many sellers offering similar products, consumers can exert pressure and influence prices.32 / 50Which of the following is considered as an economic factor in PESTLE analysis? a) Forex reserves b) Monetary policies of the RBI c) Country’s dependence on other countries in terms of important natural resources d) All the above Explanation:All the mentioned factors are considered economic factors in PESTLE analysis.33 / 50What does Industry structure in Structure Conduct Performance (SCP) analysis refer to? a) Market size b) Industry Growth rate c) Relationship among the various players in the industry d) All the above Explanation:Industry structure in SCP analysis considers market size, industry growth rate, and relationships among industry players.34 / 50Shareholding pattern and changes therein have to be informed by the companies to exchanges periodically. a) True b) False Explanation:Companies are required to disclose their shareholding pattern and any changes to stock exchanges periodically.35 / 50A good analyst must keep track of disclosures, commitments, and deliveries of an organization periodically to adjudge a company. a) False b) True Explanation:Analysts monitor various aspects, including disclosures, commitments, and deliveries, to assess and analyze the performance and outlook of a company.36 / 50Which of these Qualities are desired in a good research analyst? a) Clarity in financial concepts b) Knack for numbers and interpretation c) Ability to read and understand financial statement d) All the above Explanation:A good research analyst should possess all the mentioned qualities for effective analysis.37 / 50A bond is issued at a face value of Rs. 100 and a coupon of 10% p.a. The interest rates in the market have increased subsequently. This bond is likely to quote at: a) At a price above face value b) At a price below face value Explanation:When market interest rates increase, the value of existing bonds with lower coupon rates tends to decrease, causing them to trade at a price below face value.38 / 50The time span over which price and volume are observed factors in the impact of long term factors that influence prices over a period of time. a) True b) False Explanation:The time span considered in technical analysis influences the impact of long-term factors, affecting price and volume observations.39 / 50In technical analysis, the impact of day to day fluctuations in prices is annulled by which of the following factors? a) Increasing Time Period of price charts b) Using liquidity parameter along with prices c) Using Moving Averages d) None of the above Explanation:Moving averages are used in technical analysis to smooth out day-to-day fluctuations and identify trends.40 / 50Focus of microeconomics is on factors that influence aggregate supply and demand in an economy such as unemployment rates, gross domestic product (GDP), overall price levels, inflation, savings rate, investment rate etc. a) True b) False Explanation:Microeconomics focuses on individual markets and agents rather than aggregate factors like GDP and unemployment.41 / 50Corporate profits, computed after deducting business expenses and other specified items, are taxed at the _______ rate for Indian companies. a) 0.2 b) 0.3 c) 0.4 d) 0.5 Explanation:Corporate profits in India are taxed at the rate of 0.3 after deducting business expenses and specified items, as marked correct.42 / 50Delisting of shares refers to the ________ removal of the shares of a company from being listed on a stock exchange. a) Permanent b) Temporary c) Voluntary d) None of the above Explanation:Delisting, marked as permanent, means the removal of a company’s shares from a stock exchange, typically ending public trading of those shares.43 / 50A company cannot make bonus issue if it has defaulted on: a) Any fixed deposit raised b) Principal on any debt security issued c) Payment of interest d) All of the above Explanation:The correct answer, “All of the above,” explains that a company cannot issue bonus shares if it has defaulted on various financial obligations, ensuring financial stability.44 / 50If an investor holds 100 shares of a company with a face value of Rs. 10 each, a stock split in the ratio of 1:2 will increase the number of shares held by him to __________. a) 500; go down to Rs. 5 b) 500; go down to Rs. 2 c) 200; go down to Rs. 5 d) 200; go down to Rs. 2 Explanation:In a 1:2 stock split, the correct explanation is that an investor holding 100 shares would see the number increase to 200, with the face value per share reduced to Rs. 5.45 / 50In what type of action the acquiring company acquires all or a substantial portion of the stock of the target company and both entities typically continue to exist? a) Merger b) Consolidation c) Acquisition d) All of the above Explanation:Acquiring all or a substantial portion of the target company’s stock while both entities continue to exist defines an acquisition, as marked correct.46 / 50A company can buy back its shares out of: a) Securities premium account b) Reserves which are availablefor distribution as dividend c) Proceeds of fresh issue of shares or other specified securities d) All of the above Explanation:A company can buy back its shares from various sources, including the securities premium account, reserves available for distribution as dividends, and proceeds from fresh share issues.47 / 50During a slowdown in economies, unemployment rate _______ . a) Rises b) Falls c) There is no effect on unemployment rate d) None of the above Explanation:When an economy is going through tough times, less jobs are created and so the unemployment rate rises.48 / 50Focus of microeconomics is on factors that influence aggregate supply and demand in an economy such as unemployment rates, gross domestic product (GDP), overall price levels, inflation, savings rate, investment rate etc. State whether True or False. a) True b) False Explanation:Microeconomics focuses on individual households and firms. Macroeconomics deals with the economy as a whole. In other words, the focus of macroeconomics is on factors that influence aggregate supply and demand in an economy such as unemployment rates, gross domestic product (GDP), overall price levels, inflation, savings rate, investment rate etc.49 / 50____________ has the right to buy an asset at a predetermined price. a) Call Buyer b) Put Buyer c) Call Writer d) Put Writer Explanation:In Options, the buyers have the RIGHT but no obligations. A CALL BUYER has the right to buy an asset at a predetermined price A PUT BUYER has the right to sell an asset at a predetermined price.50 / 50The EBIT of a company is Rs 400000 and the EBIT % is 40% of the business. What is the Net Profit of the company if the Net Profit margin is 10%. a) Rs 10,000 b) Rs 1,00,000 c) Rs 40,000 d) Rs 16,000 Explanation:The EBIT is Rs 400000 which is 40% of the business ie. sales. So Sales = Rs 10,00,000 (4,00,000 / 40 x 100) Net Profit margin is 10% ie 10% of Rs 10,00,000 = Rs 1,00,000Your score is 0% Restart quiz Exit
