Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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Investment Analysis Flashcards

7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Analysis flashcards as text

  1. Two mutually exclusive projects give conflicting rankings under NPV and IRR. Which criterion should generally be used?

    Answer: NPV, because it measures the direct addition to shareholder wealth

    NPV assumes reinvestment at the cost of capital and directly measures value created, so it prevails.

  2. A firm has cash of $50, receivables of $70, inventory of $80, and current liabilities of $100. What is its quick ratio?

    Answer: 1.2

    Quick ratio = (50 + 70) / 100 = 1.2, excluding inventory.

  3. A company reports EBIT of $600 and interest expense of $150. What is its interest coverage ratio?

    Answer: 4.0

    Interest coverage = EBIT / interest expense = 600 / 150 = 4.0.

  4. A preferred stock pays a fixed annual dividend of $5 forever, and the required return is 8%. What is its value?

    Answer: $62.50

    Perpetuity value = $5 / 0.08 = $62.50.

  5. An investor buys a stock at $50, receives a $2 dividend, and sells it one year later for $55. What is the holding period return?

    Answer: 14%

    HPR = (55 − 50 + 2) / 50 = 14%.

  6. An investment returns +50% in year 1 and −50% in year 2. What is its annualized geometric mean return?

    Answer: −13.4%

    Geometric mean = √(1.5 × 0.5) − 1 ≈ −13.4%.

  7. If markets are semi-strong form efficient, which strategy should NOT earn consistent abnormal returns?

    Answer: Fundamental analysis of published financial statements

    Semi-strong efficiency means all public information, including financial statements, is already reflected in prices.