Some fundamental multiple-choice questions derived from this chapter:
1. According to the analysis of the Calumet and Hecla Consolidated Copper Company, which of the following was a significant finding that impacted the company's future valuation?
A. The company's main source of production was to be depleted within a year.
B. Most of their profits came from the sale of copper produced in previous years.
C. The only future source of production was from a high-cost operation that had been shut down.
D. All of the above.
2. Why was Freeport Sulphur Company's claim of a 25-year lifespan for their reserves considered unreliable?
A. Their reserves were located in politically unstable regions.
B. Their reserves were located in different places and would be extracted under different conditions.
C. Their main source of production was facing depletion.
D. The company was facing a significant increase in production costs.
3. When analyzing the Interborough Rapid Transit System in New York City, which discrepancy was found between market prices and actual values?
A. The company had not made strong earnings in the years leading up to 1918.
B. The company's preferred and common stocks were not recommended to the public based on projected growth.
C. The company's future earning power was overestimated despite strong earnings in previous years.
D. The company's stocks were undervalued in the market despite strong projected growth.
4. In order to make prudent investment decisions, it is essential to:
A. Rely solely on a company's past records or speculative projections.
B. Avoid any analysis of the future price of the product.
C. Consider factors such as the future price of the product, changes in the landscape of low-cost producers, and inconsistencies in pricing and value relationships.
D. Ignore the specific circumstances and unique characteristics of a company.
Answers: DBCC