Exercise 1: From March 26 to July 17, 2020, the share price of The Champion SA (C share) fell by 17% and that of The Fury SA (F share) by 34%, without any specific news and without any significant...

Finance questions


Exercise 1: From March 26 to July 17, 2020, the share price of The Champion SA (C share) fell by 17% and that of The Fury SA (F share) by 34%, without any specific news and without any significant event impacting their normal operations. The Fury SA share (F share) fell by 34%, without any specific news for these two companies and without any significant event impacting their normal operations. The Fury SA operates in the steel production sector, while The Champion SA is in the distribution of luxury goods. · Which of these two companies has, in principle, the higher proportion of fixed costs? Justify the answer. · Which of the two companies has the higher proportion of fixed costs? For what reason(s)? Exercise 2: The company The Scent SA (listed on the stock exchange) is valued on the basis of an operating income multiple of 8 while the average of a sample of listed companies operating in the same sector is 11. You deduce (only one answer is possible): -That the stock market for these stocks seems to be inefficient. -That The Scent SA is probably more indebted than the average of the companies in the sample. -That this company probably has a lower expected growth rate than the sample. -That The Scent SA is necessarily undervalued. -That none of the four previous answers is plausible. Justify the answer. Exercise 3: The companies Zhivago SA and Laurence SA, both listed on the stock exchange, belong to the same sector, and have a very comparable activity. These two companies have the same operating income multiple, but Jivago SA has a much higher P/E than Laurence SA. You deduce (only one answer is possible): -That Zhivago SA has a higher expected growth rate than Laurence SA. -That one of the two companies has an extremely low free float, so that its stock price is not significant. -That Laurence SA has more debt than Zhivago SA. -That this difference in P/E is not possible and that there must probably be a calculation error. -That none of these answers is plausible. Justify the answer. Exercise 4: · Is a company with a high distribution rate a growing or a mature company? Why is that? · Is a company with a low payout ratio a growing or mature company? why is that? Exercise 5: · Is a firm with a high P/E, all other things being equal, a growing firm or a mature firm? Justify the answer. · Is a company with a low P/E, all other things being equal, a growing company or a mature company? Justify the answer. · Is a company with a low P/E, all other things being equal, a company that presents a high or limited risk to investors? Justify your answer. · A company with a high P/E is, all other things being equal, a company that presents a high or limited risk to investors? Justify the answer. Exercise 6: In June 2019, Mayerling SA took out a 7-year bank loan at an interest rate of 5.5%. · Are the financial costs of this loan fixed costs or variable costs? Justify the answer. In January 2021, Mayerling SA took out a new 5-year bank loan with a variable interest rate. This rate is recalculated every three months on the basis of the average bank market rate plus a risk premium of 250 basis points. · Are the financial costs of this loan fixed costs or variable costs? For what reason(s)? Exercise 7: · Where should the post "Marketable securities" be classified among the four main components of an economic balance sheet that shows economic assets in direct reading? Why is this? · Where should the item "VAT invoiced" be classified among the four main components of an economic balance sheet that shows economic assets directly? Why? · Where should the item "Plant, machinery and equipment" be classified among the four main components of an economic balance sheet that shows economic assets directly? · Why should the items "Additional paid-in capital" and "Bonds" be classified among the four main components of an economic balance sheet that shows economic assets directly? Why should this be done?