CSC CANADIAN SECURITIES COURSE EXAM
Fundamental Analysis - ANSWER Accessing short medium and long range
prospects of different industries for security prices.
Take into account capital market, the economy, industry, and the individul company
conditions to find intrinsic value.
Is it overvalued or undervalued?
Focus on what can effect the dollar value, ex. The expected / actual profitability
Technical Analysis - ANSWER Use historical prices and their behavior to predict the
future.
Make sure to understand the sentiment not the fundamentals. Focus on the market.
Investors might act irrational based on those events. Is it recurring or predictable?
- all influences accounted for automatically
- prices will move in trends for a long time
- believes the future will repeat the past
Program Trading/High-Frequency Trading - ANSWER Sophisticated computerized
trading strategies
Random walk Theory - ANSWER New information is disseminated over time.
Price changes are random.
Past prices are not useful because the company has already adjusted the price for
the developments.
Rational Expectations Hypothesis - ANSWER People are rational and have all the
information.
They make smart decision for self interest. Past mistakes can be avoided with new
information.
Inefficiencies of market theories - ANSWER New information not available to
everyone.
Not everyone reacts the same.
Not all forecasts are accurate.
Investors psychology or greed could be irrational.
Efficient Market Hypothesis - ANSWER Stock price is the best estimate of true value.
The profit seeking with react quick and adjust for intrinsic value.
Stock price fully reflects all available information.
3 Types of Information - ANSWER 1. Weak: past information with current prices
2. Semi-strong: public information in current prices
3. Strong: all information in current prices, no advantages
* strong is. Passive approach, they will buy and hold
Fiscal policy Impact - ANSWER Tax Changes
Sales/personal tax goes UP
,income and spending goes DOWN
tax on profits for corporations goes UP
LESS CASH for dividends or expansions
Government Spending goes UP
Stimulates in the short run
Can help implementation of government policies
Government Debt goes UP
more restrictive policies
Savings plans increase available cash, so increase in demand
Monetary Policy Impact - ANSWER Bond Market
More expnsions/credit
negative impact so BOC RATES GO UP
To much growth, bond yields fall if economy is slowing down:TILTING
Inflation
Creates uncertainty
High interest, low profits, low price per earnings ratio, high inventory/labour, high
prices, low customer service prices
Consumer Discretionary - ANSWER Automobiles, apparel, consumer services,
media, and retailing
Consumer staples GIC - ANSWER Food, beverages, tobacco, household/personal
products
Financials GIC - ANSWER Banks, diversifies financials, insurance
Health care GIC - ANSWER Equipment, services, pharmaceuticals, biotechnology,
life sciences
Industrial GIC - ANSWER Capital goods, commercial/professional services,
transportation
Emerging Growth Industries - ANSWER Continually developing to meet needs.
Unprofitable at first.
Promising furture.
Large start, negative cash flows.
Impossible to predict survival.
Not always accessible to investors.
Speculative industries.
Growth Industries - ANSWER Sale/earnings comsistantly expanding faster.
Common shares = growth stocks.
Customer awareness.
Lower production costs.
Increased competition and demand.
No large dividends, finance with retained earnings.
, Increased price earnings ratio and decreased dividend yield
Mature Industries - ANSWER slower/stable growth, closer match to the economy.
Earnings are positive.
Increase in price competition.
Profit margin decreased.
Expand into new business.
Recession: decline in earnings less than others
Declining Industries - ANSWER Stop in growth or declining.
Demand decreases because of change in technology.
Can't compete with new costs.
Change in consumer taste.
Cash flow is big but not invested.
Profit is low.
5 Competitve Forces - ANSWER 1. Threat of new entry : ease of entry, required
capital, opportunities, channels, regulatory factors, product difference
2. Competitive Rivalry : numbers of competition, strength, growth, unique products
3. Threat of substitute : pressure, similar products
4. Bargaining power of buyers : pressure for lower price, degree of influence,
semsitivity
5. Bargaining power of suppliers: pressure for higher price for resources, costs will
effect profit margin or product quality
Cyclical Industries - ANSWER Large international exporters of commoditites.
Sensitive to global conditions.
Expansion/contraction of the USA business cycle will influence profit
Commodities, industrial, or consumer based
Defensive industires - ANSWER Stable return on investor equity.
BLUE CHIP : shares of top companies that are not effected by the economy much.
Bank stock prices are sensitive (debt) and mortages are a large portion of revenue.
Gas, water, and electricity based
Speculative industries - ANSWER Risk/uncertainty usually high.
Lack definitive information.
Can be emerging growth companies or growth companies if investors have doubt.
Chart/Technical Analysis - ANSWER Support level : bottom price (sense value)
unwilling to sell if the holder. S DOWN D UP
Resistance level : top price willing to sell but unwilling to buy. S UP D DOWN
Reversl Pattern : trend reverses
Continuation Pattern : pause in trend 3w to 6m (zig zag motion)
Head and Shoulders Pattern - ANSWER In technical analysis, a reversal pattern that
is formed in three parts: a left shoulder, head, and right shoulder; used to predict a
change from an uptrend to a downtrend.
Fundamental Analysis - ANSWER Accessing short medium and long range
prospects of different industries for security prices.
Take into account capital market, the economy, industry, and the individul company
conditions to find intrinsic value.
Is it overvalued or undervalued?
Focus on what can effect the dollar value, ex. The expected / actual profitability
Technical Analysis - ANSWER Use historical prices and their behavior to predict the
future.
Make sure to understand the sentiment not the fundamentals. Focus on the market.
Investors might act irrational based on those events. Is it recurring or predictable?
- all influences accounted for automatically
- prices will move in trends for a long time
- believes the future will repeat the past
Program Trading/High-Frequency Trading - ANSWER Sophisticated computerized
trading strategies
Random walk Theory - ANSWER New information is disseminated over time.
Price changes are random.
Past prices are not useful because the company has already adjusted the price for
the developments.
Rational Expectations Hypothesis - ANSWER People are rational and have all the
information.
They make smart decision for self interest. Past mistakes can be avoided with new
information.
Inefficiencies of market theories - ANSWER New information not available to
everyone.
Not everyone reacts the same.
Not all forecasts are accurate.
Investors psychology or greed could be irrational.
Efficient Market Hypothesis - ANSWER Stock price is the best estimate of true value.
The profit seeking with react quick and adjust for intrinsic value.
Stock price fully reflects all available information.
3 Types of Information - ANSWER 1. Weak: past information with current prices
2. Semi-strong: public information in current prices
3. Strong: all information in current prices, no advantages
* strong is. Passive approach, they will buy and hold
Fiscal policy Impact - ANSWER Tax Changes
Sales/personal tax goes UP
,income and spending goes DOWN
tax on profits for corporations goes UP
LESS CASH for dividends or expansions
Government Spending goes UP
Stimulates in the short run
Can help implementation of government policies
Government Debt goes UP
more restrictive policies
Savings plans increase available cash, so increase in demand
Monetary Policy Impact - ANSWER Bond Market
More expnsions/credit
negative impact so BOC RATES GO UP
To much growth, bond yields fall if economy is slowing down:TILTING
Inflation
Creates uncertainty
High interest, low profits, low price per earnings ratio, high inventory/labour, high
prices, low customer service prices
Consumer Discretionary - ANSWER Automobiles, apparel, consumer services,
media, and retailing
Consumer staples GIC - ANSWER Food, beverages, tobacco, household/personal
products
Financials GIC - ANSWER Banks, diversifies financials, insurance
Health care GIC - ANSWER Equipment, services, pharmaceuticals, biotechnology,
life sciences
Industrial GIC - ANSWER Capital goods, commercial/professional services,
transportation
Emerging Growth Industries - ANSWER Continually developing to meet needs.
Unprofitable at first.
Promising furture.
Large start, negative cash flows.
Impossible to predict survival.
Not always accessible to investors.
Speculative industries.
Growth Industries - ANSWER Sale/earnings comsistantly expanding faster.
Common shares = growth stocks.
Customer awareness.
Lower production costs.
Increased competition and demand.
No large dividends, finance with retained earnings.
, Increased price earnings ratio and decreased dividend yield
Mature Industries - ANSWER slower/stable growth, closer match to the economy.
Earnings are positive.
Increase in price competition.
Profit margin decreased.
Expand into new business.
Recession: decline in earnings less than others
Declining Industries - ANSWER Stop in growth or declining.
Demand decreases because of change in technology.
Can't compete with new costs.
Change in consumer taste.
Cash flow is big but not invested.
Profit is low.
5 Competitve Forces - ANSWER 1. Threat of new entry : ease of entry, required
capital, opportunities, channels, regulatory factors, product difference
2. Competitive Rivalry : numbers of competition, strength, growth, unique products
3. Threat of substitute : pressure, similar products
4. Bargaining power of buyers : pressure for lower price, degree of influence,
semsitivity
5. Bargaining power of suppliers: pressure for higher price for resources, costs will
effect profit margin or product quality
Cyclical Industries - ANSWER Large international exporters of commoditites.
Sensitive to global conditions.
Expansion/contraction of the USA business cycle will influence profit
Commodities, industrial, or consumer based
Defensive industires - ANSWER Stable return on investor equity.
BLUE CHIP : shares of top companies that are not effected by the economy much.
Bank stock prices are sensitive (debt) and mortages are a large portion of revenue.
Gas, water, and electricity based
Speculative industries - ANSWER Risk/uncertainty usually high.
Lack definitive information.
Can be emerging growth companies or growth companies if investors have doubt.
Chart/Technical Analysis - ANSWER Support level : bottom price (sense value)
unwilling to sell if the holder. S DOWN D UP
Resistance level : top price willing to sell but unwilling to buy. S UP D DOWN
Reversl Pattern : trend reverses
Continuation Pattern : pause in trend 3w to 6m (zig zag motion)
Head and Shoulders Pattern - ANSWER In technical analysis, a reversal pattern that
is formed in three parts: a left shoulder, head, and right shoulder; used to predict a
change from an uptrend to a downtrend.
