Canadian Securities Course (CSC) Exam 2 With complete solution 2024/25

Canadian Securities Course (CSC) Exam
2 With complete solution 2024/25
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Fundamental Analysis ll ll ll ll ll ll ll ll ll ll ll

Accessing short medium and long range prospects of different industries for security
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prices. ll ll ll ll ll ll ll ll ll ll ll

Take into account capital market, the economy, industry, and the individul company
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conditions to find intrinsic value.
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Is it overvalued or undervalued? ll ll ll ll ll ll ll ll ll ll ll ll ll

Focus on what can effect the dollar value, ex. The expected / actual profitability ll

Technical Analysis ll ll ll ll ll ll ll ll ll

Use historical prices and their behavior to predict the future.
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Make sure to understand the sentiment not the fundamentals. Focus on the market. ll ll ll ll ll ll ll ll ll ll ll ll

Investors might act irrational based on those events. Is it recurring or predictable?
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- all influences accounted for automatically
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- prices will move in trends for a long time
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- believes the future will repeat the past ll ll

Program Trading/High-Frequency Trading ll ll ll

Sophisticated computerized trading strategies ll ll

Random walk Theory ll ll ll ll ll

New information is disseminated over time.
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Price changes are random. ll ll ll ll ll ll ll ll ll ll ll ll ll ll

Past prices are not useful because the company has already adjusted the price for the
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developments. ll ll

Rational Expectations Hypothesis ll ll ll ll ll ll ll

People are rational and have all the information.
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They make smart decision for self interest. Past mistakes can be avoided with new
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information. ll ll ll

Inefficiencies of market theoriesll ll ll ll ll

New information not available to everyone.
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Not everyone reacts the same.
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Not all forecasts are accurate. ll ll ll ll ll ll

Investors psychology or greed could be irrational. ll ll

Efficient Market Hypothesis ll ll ll ll ll ll ll ll

Stock price is the best estimate of true value.
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The profit seeking with react quick and adjust for intrinsic value.
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Stock price fully reflects all available information.
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3 Types of Information
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1. Weak: past information with current prices
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2. Semi-strong: public information in current prices
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3. Strong: all information in current prices, no advantages
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* strong is. Passive approach, they will buy and hold

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Fiscal policy Impact
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Tax Changes ll ll ll

Sales/personal tax goes UP ll ll ll ll

income and spending goes DOWN
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tax on profits for corporations goes UP
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LESS CASH for dividends or expansions
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Government Spending goes UP ll ll ll ll

Stimulates in the short run
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Can help implementation of government policies
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Government Debt goes UP ll ll

more restrictive policies ll ll ll ll ll ll ll ll

Savings plans increase available cash, so increase in demand ll ll

Monetary Policy Impact ll

Bond Market ll

More expnsions/credit ll ll ll ll ll ll

negative impact so BOC RATES GO UP
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To much growth, bond yields fall if economy is slowing down:TILTING

Inflation ll

Creates uncertainty ll ll ll ll ll ll ll ll ll ll ll ll

High interest, low profits, low price per earnings ratio, high inventory/labour, high prices,
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low customer service prices ll

Consumer Discretionary ll ll ll ll ll ll

Automobiles, apparel, consumer services, media, and retailing ll ll

Consumer staples GIC ll ll ll ll

Food, beverages, tobacco, household/personal products
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Financials GIC ll ll ll

Banks, diversifies financials, insurance ll ll

Health care GIC ll ll ll ll ll

Equipment, services, pharmaceuticals, biotechnology, life sciences ll

Industrial GIC ll ll ll ll

Capital goods, commercial/professional services, transportation ll ll

Emerging Growth Industries ll ll ll ll

Continually developing to meet needs. ll ll

Unprofitable at first. ll

Promising furture. ll ll ll ll

Large start, negative cash flows. ll ll ll

Impossible to predict survival.
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Not always accessible to investors. ll

Speculative industries. ll

Growth Industries ll ll ll

Sale/earnings comsistantly expanding faster. ll ll ll ll

Common shares = growth stocks.

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Customer awareness. ll ll

Lower production costs. ll ll ll

Increased competition and demand.
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No large dividends, finance with retained earnings. ll ll ll ll ll ll ll

Increased price earnings ratio and decreased dividend yield
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Mature Industries ll ll ll ll ll ll

slower/stable growth, closer match to the economy. ll ll

Earnings are positive. ll ll ll

Increase in price competition. ll ll

Profit margin decreased. ll ll ll

Expand into new business. ll ll ll ll ll ll

Recession: decline in earnings less than others ll

Declining Industries ll ll ll ll

Stop in growth or declining. ll ll ll ll ll ll

Demand decreases because of change in technology.
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Can't compete with new costs. ll ll ll

Change in consumer taste. ll ll ll ll ll ll

Cash flow is big but not invested.
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Profit is low.
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5 Competitve Forces
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1. Threat of new entry : ease of entry, required capital, opportunities, channels, regulatory
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factors, product difference
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2. Competitive Rivalry : numbers of competition, strength, growth, unique products
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3. Threat of substitute : pressure, similar products
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4. Bargaining power of buyers : pressure for lower price, degree of influence, semsitivity
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5. Bargaining power of suppliers: pressure for higher price for resources, costs will effect
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profit margin or product quality ll

Cyclical Industries ll ll ll ll

Large international exporters of commoditites. ll ll ll

Sensitive to global conditions. ll ll ll ll ll ll ll ll

Expansion/contraction of the USA business cycle will influence profit
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Commodities, industrial, or consumer based ll

Defensive industires ll ll ll ll

Stable return on investor equity. ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll

BLUE CHIP : shares of top companies that are not effected by the economy much. Bank
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stock prices are sensitive (debt) and mortages are a large portion of revenue.
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Gas, water, and electricity based
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Speculative industries ll ll

Risk/uncertainty usually high.
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Lack definitive information.
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Can be emerging growth companies or growth companies if investors have doubt. ll

Chart/Technical Analysis ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll

Support level : bottom price (sense value) unwilling to sell if the holder. S DOWN D UP