Other

Question 1

Selling short

Answer 1

You do not own the stock but believe you can purchase it at a lower price at a later date

Borrow, sell, return stock

Not all stocks can be shorted

Question 2

Liquidity

Answer 2

Refers to how quickly a stock can be bought and sold on open market. More liquid is safer.

Money markets and large caps are more liquid.

Question 3

What is a high PE ratio

Answer 3

Depends on comparison to other firms.

A high PE ratio reflects high anticipated earnings growth

Question 4

IPO process

Answer 4

Meet client, gather info
Draft registration document (detail of business operations)
Roadshow, pitch the stock to institutional investors
Trade

Question 5

IPO purpose

Answer 5

To issue least amount of shares for highest possible price i.e. raise most amount of money for least equity give up

If the stock increases in price in the first trading days the IPO left money on the table and could have sold at a higher price than it did

Question 6

Primary vs secondary offering

Answer 6

Primary offering is new shares, diluting existing shares

Secondary are existing shared sold to new investors and not diluting

IF an IPO is 100% secondary shares it sends a signal there is limited long term prospects

Question 7

How to increase stock price

Answer 7

Repurchase stock

Perform better

Growth, organic and inorganic (MA increases EPS)

Announce cost cutting

Question 8

Adding a risky stock to PF impact on PF risk

Answer 8

Only depends on stock correlation to PF. If there is a negative correlation, the risky stock could de risk total pf.