Understanding Stocks and Bonds

What does purchasing stock in a company make you?

• An employee

• A bondholder

• A part-owner

• A creditor

What is the primary difference between stocks and bonds?

• Stocks make you a lender, bonds do not.

• Bonds give voting rights in the company.

• Bonds are riskier than stocks.

• Stocks represent ownership, bonds represent lending.

What does owning a bond make you in relation to the company?

• A lender

• A part-owner

• A CEO

• A shareholder

What is an asset?

• Something of value that provides future benefit

• A liability

• A type of stock

• Money owed to the company

What happens to the owners' equity if a company's assets are sold for their full value and all debts are paid?

• It remains unchanged

• It increases by the value of the assets

• It decreases by the amount of the debt

• It equals the remaining cash after debts are paid

What is the role of 'current assets' in a company's balance sheet?

• Assets that are to be sold after a year

• Cash or assets easily converted into cash within a year

• Assets depreciating within a year

• Long-term investments

What is the formula for calculating owners' equity?

• Liabilities - Assets

• Assets + Liabilities

• Assets - Liabilities

• Assets / Liabilities

What is typically included in 'other current assets'?

• Long-term investments

• Fixed assets

• Intangible assets

• Stocks or other quick-sale investments

What does 'current liabilities' refer to?

• Long-term financial obligations

• Debts to be paid in over five years

• Debts to be paid within the next year

• The total equity of the company

How is the value of a share determined?

• By dividing the equity by the number of shares

• By multiplying the equity by the number of shares

• By market speculation only

• By dividing the total debt by the number of shares