Stock Basics Review

Which of the following is NOT a statement that could apply to a stock?

• It is a security that shows partial ownership of a company's asset.
• The more shares you own, the more of a claim you have in a company.
• They are also known as equities and measured in shares.
• It is a certificate that shows you have total control of a company.

Why do companies sell stocks?

• To try and take the company back from public owners.
• To encourage more individual ownership
• Primarily to make money and raise funds to run the business.
• To try to get an easy tax write-off.

Which of the following is not a perk to being a shareholder (stockholder)?

• You can start a franchise with the company you own a stock with.
• Access dividends (if offered by the company).
• Get to vote in company matters
• Own a part of the company's assets.

You are an investor, who just bought a stock this year and sold it for a profit of $5,000. If you are in a tax bracket that has a capital gains tax rate of 30%, how much will you have to pay in taxes on your capital gains?

• $1,000
• $1,500

• $150

• $2,500

Which of the following is good advice, when it comes to avoiding Capital gains taxes.

• Hire a good lawyer who can hide your funds from the government
• Hold onto your stocks for longer than a year to avoid paying a large tax fee.
• Sell your stocks quickly to keep it from accumulating value and having to pay more later.
• Diversify your portfolio to mitigate your losses.

If you get a quarterly dividend from Toyota in the amount of $2.50 per share, how much will you get in one year, if you own 20 shares?

• $200.00

• $50.00

• $100.00

• $250.00

A rising stock price is a sign that...

• The market is experiencing high inflation.
• People are holding their shares, refusing to sell.
• People want out of the stock and trying to bid up the price before selling.
• There is high demand for the stock but limited shares

Which organization will investigate unfair market practices and insider trading?

• Federal Communications Commission (FCC)
• Securities and Exchange Commission (SEC)
• Central Intelligence Agency (CIA)
• Federal Bureau of Investigation (FBI)

If the market has been on a steady rise for the last few months and seems to see a rise in stock prices, which type of market is being described?

• Bull Market
• Bear Market
• Pig Market
• Rat Market

If a company wants to go public, what do they have to do first?

• Disclose their market transactions to the FBI to be verified.
• Replace all of their previous managers with ones elected by a board.
• File an initial public offer (IPO).
• Make sure all financial information is kept private to avoid insider trading.