WorksheetsFP Lesson 3
Total questions: 55
Worksheet time: 28mins
Which is the least important variable of a bond fund?
rate at which the money in the fund increases
amount of time spent researching the fund
credibility ratings of the fund
average maturity of the fund
Which document is different from a standard financial statement?
balance sheet
shareholder sheet
income statement
cash flow statement
The Cutting Edge Company is very popular with investors, who keep buying shares even though the stock price is increasing. In this case, which company value is increasing?
accounting
intrinsic
market
underlying
Teri decided to invest in a few different mutual funds rather than put all her investment dollars into one or two individual stocks. A stock in one of her mutual funds became worthless, but since her investment was spread out, Teri was only slightly affected. What advantage of mutual funds does Teri's situation illustrate?
liquidity
convenience
diversification
professional money management
What does an income statement show about a company over a period of time?
equity
liabilities
profitability
reliability
Which statement is true about assessing the fundamentals of a security?
Fundamental analysis results in a reliable prediction of the stock price for the next year.
Fundamental analysis is a complicated procedure that is inappropriate for beginning investors.
Even investment experts disagree about the most important ratios to consider in fundamental analysis.
The only valid approach to fundamental analysis is based on the work of investment guru Warren Buffett.
Too much diversification in a financial portfolio can:
dilute the value of big gains on an individual stock.
cause other investors to avoid a particular stock.
keep stock fund managers from doing their jobs.
prevent a stock from growing in value.
Sammy received one share of stock in Nike, Inc., as a gift. He wondered how much of the company profit went to his single share, so he divided the net income by the number of outstanding shares of common stock. What common ratio did Sammy calculate?
gross profit margin
earnings per share
return on equity
price-earnings
On a stock table, net change shows the difference between:
the highest and lowest prices for the day.
the highest and lowest prices for the year.
the day's closing price and the previous day's price.
last year's average price and this year's average price.
Which type of bond does a company issue to raise financing for ongoing operations or expanding the business?
savings bond
treasury bond
corporate bond
municipal bond
Which is considered a reliable bond?
callable
corporate
government
puttable
Mutual funds that contain both stocks and bonds are known as:
exchange-traded funds.
money market funds.
balanced funds.
index funds.
Robyn bought 100worthofstockinacompany,andthestockisnowworth 150. This is an illustration of:
capital appreciation.
a stock exchange.
a stock split.
dividends.
Which statement is false about using a buy-and-hold strategy?
Assets need only passive management.
There are tax benefits for this method.
Stocks must be carefully monitored.
Price fluctuations can be ignored.
Which individual does in-depth work on formulating investment strategies for clients, helping them fulfill their needs, and reaching their financial goals?
financial planner
investment banker
financial consultant
mutual fund manager
Which type of stock comes with voting rights?
income
common
preferred
small cap
Which is essential for making wise investment decisions?
age
intelligence
knowledge
wealth
Return on equity (ROE) measures management's ability to make a profit:
from the money generated by sales.
by becoming more efficient in operations.
by becoming shareholders of smaller firms.
from the money that shareholders have invested.
Kent wants to learn as much as possible about the mutual fund that he is considering as an investment. Which is the best place he could go for detailed information?
newspaper
trade magazine
mutual fund website
mutual fund prospectus
Publicly traded companies are required to provide:
stock research.
yearly newsletters.
financial statements.
business report cards.
For assessing the value of a stock, which represents an invalid qualitative factor to consider?
staying on top of trends
offering more healthful food
employing experienced managers
paying the CEO a reasonable amount
The specialist who is a member of a stock exchange and acts as the market maker to facilitate the trading of a given stock is called a:
financial analyst.
financial planner.
trust operations specialist.
securities operations specialist.
Which is an important business factor to consider when choosing an investment?
time horizon
risk tolerance
minimization of taxes
comparison to competition
When assessing a stock by using fundamental analysis, an investor should consider:
qualitative and quantitative factors.
a chart of the price over the last year.
only ratios and other quantitative factors.
recent trends that might affect the short-term price.
Glenn has committed to investing 100eachmonthinhisfavoritestock.Lastmonth,whenthestockpricewas 20, he bought five shares. This month the stock price is $25, so he bought just four shares. This strategy is called:
dollar cost averaging.
growth investing.
diversification.
buy-and-hold.
An individual who often works as part of a financial institution and is primarily concerned with raising capital for corporations, governments, or other entities is called a/an:
market consultant.
investment banker.
mutual fund manager.
securities sales agent (broker).
A class of financial ratios that measures the ability of a company to turn available resources into cash and to pay its bills is called:
debt ratios.
liquidity ratios.
profitability ratios.
asset management ratios.
Quantitative measures such as ratios are helpful because they:
can be used in context.
are figured the same way regardless of the source.
can be used to compare companies in different industries.
show the relationship between numbers on a company's financial statements.
Which factor should have the least influence on a person's investment choices?
age
marital status
current income
financial decisions of one's parents
Which is least likely to be a valid reason for making a significant change in a personal asset allocation?
marriage
birth of a child
new car purchase
large shift in inflation
Since John wants to know the bond’s interest rate, he needs to look at the bond’s:
issuer.
coupon.
maturity.
par value.
Before investing, a buyer should:
conduct thorough research.
be at least 25 years old.
graduate from college.
own a car.
Which is a true statement about ticker symbols?
They are only given to companies on the New York Stock Exchange.
They are made up of the first three letters of a company's name.
They uniquely identify a company.
They identify the kind of stock.
Fundamental analysis estimates the value of a stock primarily so investors can tell whether it is:
a short-term or long-term investment.
competitive or noncompetitive.
undervalued or overvalued.
run by effective managers.
Which is an appropriate investment objective for a mutual fund with a buy-and-hold approach?
covering a broad range of industries
seeking long-term capital appreciation
investing primarily in a diversified portfolio
investing in stocks with superior growth potential
The price-earnings (PE) ratio measures:
stock price compared to sales.
stock price compared to shareholders' equity.
management's ability to streamline operations.
investors' expectations about a company's performance.
A bond's profit or loss over a period of time at a particular amount is called the:
yield.
liquidity.
maturity.
bid price.
Jamie owned 300 shares in a certain company, worth 10pershare.Thecompanyrecentlyannouncedthathis300shareswouldbecome600shares,worth 5 per share. This is an illustration of:
capital appreciation.
a stock exchange.
a stock split.
dividends.
Which statement is false about Form 8-K?
Companies are required to file it within 15 days of a significant event.
Companies are required to file it for the first three quarters of the fiscal year.
The form describes changes in company management, products, acquisitions, or legal actions.
The form is important because it alerts investors to events that might affect a company's fundamental value.
A place where investors can trade securities that have been issued by a corporation is known as a/an:
primary market.
secondary market.
stock market index.
initial public offering.
A company that Marcus invested in has earned a profit, and now he is receiving a cash payment. This is an illustration of:
dividends.
a stock split.
a stock exchange.
capital appreciation.
Which item should be placed in the liabilities section on a company balance sheet?
cash
buildings
inventory
employee wages
Darron is investigating a few corporate bonds for investment. He wants to know how likely it is that the corporations will pay back what they have borrowed. Darron needs to look at the:
issuer.
bid price.
bond rating.
coupon rate.
A mutual fund that has no limit on the number of shares it can issue or the amount of money it can hold is called a/an:
stock fund.
growth fund.
open-end fund.
closed-end fund.
Which information is a person unable to obtain from a stock table?
the daily volume
the yearly price range of the stock
whether the stock price is up or down
breaking news affecting the company that day
The most important factor to consider when choosing an investment is:
the stockholder's ability to influence company decisions.
whether the investment supports financial goals.
whether the security pays an annual dividend.
the short-term profitability of the investment.
When Staci is told to “consider the cost” before selling an investment, she is being advised to:
estimate the effect of commissions and tax costs on her transaction.
review every one of the costs she has incurred thus far.
calculate the costs of prior transactions.
negotiate for a better, cost-saving deal.
The PEG ratio is unique because it incorporates price, earnings, and:
gross profit.
gross sales.
growth of EPS.
growth rate of earnings.
Ratios are calculated by:
multiplying or dividing, depending on the ratio.
adding or subtracting, depending on the ratio.
multiplying one number by another.
dividing one number by another.
If a stock price rises and falls sharply within a 52-week period, it is said to be:
healthy.
solid.
stable.
volatile.
When investing to reach a goal within three years, one invests toward a/an:
long-term time horizon.
short-term time horizon.
risk-tolerant time horizon.
intermediate-term time horizon.
Which is a disadvantage of investing in bonds?
low returns
meeting long-term goals
offering unmatched reliability
performing well when the economy is poor
Which best describes a marketable bond?
one that is bought and sold in the open market
one that later becomes a stock at a market
one that comes from a governing body
one that is paid back before maturity
Which person will analyze, interpret, and process a wide variety of transactions, and be aware of their impact to assets on behalf of a beneficiary?
financial planner
investment banker
trust operations specialist
securities operations specialist
Which is a poor way to find companies in which to invest?
Read reputable investment magazines and newspapers.
Discuss investment opportunities with family and friends.
Follow suggestions in unsolicited e-mails and phone calls.
Investigate businesses that have interesting products and services.
