Fundamental analysis of commodities: NISM Series XV notes and practice questions

Q1. Which statement best describes “Stock-to-use ratio”?

1. The weighted average cost of capital blends the cost of equity and after-tax cost of debt in proportion to their weights, and is the discount rate for FCFF.
2. Independent directors on the board and its committees provide oversight free from management and promoter influence.
3. The record date is the date on which a shareholder must be on the company's register to be eligible for a corporate benefit.
4. The stock-to-use ratio compares closing stocks with consumption; low levels signal tightness and price pressure.

Q2. Which statement best describes “Futures curve”?

1. The top-down approach starts with the economy, then selects industries and finally companies.
2. A Chinese wall is a set of information barriers that separates research from other business such as investment banking and trading to prevent misuse of sensitive information.
3. The futures curve plots prices across expiries; contango signals plentiful supply and backwardation signals tightness.
4. The quick ratio excludes inventory from current assets and divides by current liabilities, a stricter test of liquidity.

Q3. Which term is described here? The cost of carry includes storage, insurance and financing costs, and links futures prices to spot prices.

1. Cost of carry in commodities
2. Recommendation requirements
3. Stock-to-use ratio
4. Public appearance disclosures

Q4. Which statement best describes “Crude oil drivers”?

1. Dividend yield is the annual dividend per share divided by the share price and shows income return.
2. Crude oil prices are driven by OPEC+ decisions, global demand, inventories and geopolitical events.
3. CAPM estimates the cost of equity as the risk-free rate plus beta times the equity risk premium.
4. A double top is a bearish reversal pattern in which price makes two peaks at a similar level and then breaks below the trough between them.

Q5. Which statement best describes “Gold drivers”?

1. The securities market has equity, debt, derivatives and commodity segments, each with its own instruments and participants.
2. A death cross occurs when the 50-day average crosses below the 200-day average, a bearish signal.
3. Gold prices are influenced by real interest rates, the US dollar, central bank buying, inflation expectations and risk sentiment.
4. A business model describes how a company creates, delivers and captures value, and what drives its revenue and costs.

Q6. Which statement best describes “Cost of carry in commodities”?

1. Fibonacci retracement levels such as 38.2%, 50% and 61.8% mark likely pullback areas within a trend.
2. Operating leverage reflects the share of fixed costs in total costs; higher fixed costs magnify the effect of sales changes on profit.
3. An individual research analyst must hold the prescribed qualification and the NISM research analyst certification and meet other norms.
4. The cost of carry includes storage, insurance and financing costs, and links futures prices to spot prices.