Understanding Investing Fundamental Analysis

What is the primary purpose of fundamental analysis?

• To predict future stock prices

• To examine a company's financial statements to decide if its stock is a good investment

• To analyze market trends

• To evaluate the performance of stock indices

Which of the following is NOT a component of a balance sheet?

• Assets

• Liabilities

• Shareholders' equity

• Net income

What are assets typically comprised of?

• Debts and loans

• Cash, equipment, and property

• Revenues and expenses

• Dividends and reinvestments

How is shareholders' equity calculated?

• Assets minus liabilities

• Revenues minus expenses

• Cash flow minus debts

• Dividends plus reinvestments

What does an income statement show?

• A company's assets and liabilities

• A company's revenues and expenses

• A company's cash flow

• A company's stock prices

What is net income?

• The total assets of a company

• The earnings of a company after subtracting expenses from revenues

• The total liabilities of a company

• The cash flow of a company

What is the purpose of the cash flow statement?

• To show how a company uses its cash to operate and invest

• To list all of a company's assets

• To calculate the company's net income

• To determine the company's stock price

Why is the cash flow statement considered more difficult to manipulate than an income statement?

• It includes more detailed information about cash usage

• It is audited more frequently

• It is regulated by the government

• It is simpler to understand

What does the P/E ratio help investors determine?

• The total assets of a company

• The best value of a stock beyond its price

• The company's cash flow

• The company's liabilities

How is earnings per share (EPS) calculated?

• Net income divided by total assets

• Net income divided by the number of outstanding shares

• Total revenue divided by total expenses

• Total liabilities divided by shareholders' equity