Chapter 14 and Forms

Question 1

What is filed with the SEC as an Annual report

Answer 1

Form 10-k

Question 2

Quarterly Report

Answer 2

Form 10-Q

Question 3

Form which reports Material Events, which may affect share price or financial condition, that are reported within 4 business days.

Answer 3

Form 8-k

Question 4

This is filed when a corp intends to solicit voting powers of attorney from shareholders

Answer 4

Proxy Statements

Question 5

Form which Institutional investment managers that exercise discretion may need to file quarterly

Answer 5

Form 13F

Question 6

Cash transactions that total over $10,000 in a single day trigger this

Answer 6

CTR (Currency Transaction Reports)

Question 7

This broad type of analysis is based on examining the past performance of a stock or index

Answer 7

Technical analysis

Question 8

This broad type of analysis involves reviewing the basic make-up of a corporation.

Answer 8

Fundamental analysis

Question 9

Describe the Balance Sheet

Answer 9

Assets, Liabilities, and Stockholders’ Equity. Total Assets = Total Liabilities + Stockholders’ Equity

Question 10

Where can an investor find details on major events during the previous accounting period?

Answer 10

The footnotes of the Balance Sheet

Question 11

Market capitalization of Large-Cap Stocks?

Answer 11

Above $10 billion

Question 12

Market cap of Mid-Cap Stocks?

Answer 12

$2-10 billion

Question 13

Market cap of Small-Cap Stocks

Answer 13

$300 million-$2 billion

Question 14

Market cap of Micro-Cap Stock

Answer 14

$50 million-$300 million. Only suitable for speculation.

Question 15

How do you find the Working Capital of a company?

Answer 15

Current Assets minus Current Liabilities. Working Capital = Total Current Assets - Total Current Liabilities.

Question 16

What does a Positive Working Capital mean?

Answer 16

That the company’s current assets are sufficient to cover its current liabilities.

Question 17

What does a Negative Working Capital mean?

Answer 17

The company may have difficulty repaying its liabilities that are due in the short term.

Question 18

What are liquidity ratios?

Answer 18

They indicate a company’s ability to meet short-term liabilities and ability to convert current assets into cash.

Question 19

What are leverage ratios?

Answer 19

They measure how much a company has borrowed and how much additional debt it can issue to fund its business.

Question 20

How do you find the Current Ratio?

Answer 20

Divide Current Assets by Current Liabilities (Same as working capital, but with division)

Question 21

What does the Current Ratio tell you?

Answer 21

It’s a measurement of liquidity and whether a firm has enough resources to pay its debts over the next 12 months.

Question 22

How do you find the Quick Asset Ratio?

Answer 22

Also known as the Acid Test, subtract Inventory from Current Assets and divide by Current Liabilities. It’s just like Current ratio, but takes out Inventory.

Question 23

How do you find the Debt-to-Equity Ratio?

Answer 23

Bonds + Preferred Stock divided by Shareholder’s Equity.

Question 24

What form to file when you acquire 5% of a company’s outstanding shares?

Answer 24

13D

Question 25

What's the other name for the Corporate Income Statement?

Answer 25

Profit and Loss Statement

Question 26

Describe the Income Statement line by line

Answer 26

1. Sales minus Operating Expenses minus Depreciation = 2. Operating Income plus Other Income = 3. Earnings Before Interest and Taxes minus Bond Interest = 4. Earnings Before Tax minus Taxes = 5. Net Income or (Loss)

Question 27

How to find Earnings per Share (EPS)

Answer 27

Information is needed from both the balance sheet and income statement. EPS = Net Income minus Preferred Dividends divided by Number of Outstanding Shares

Question 28

How to find Price-to-Earnings (P/E) Ratio

Answer 28

Market Price divided by Earnings per Share

Question 29

What does the P/E Ratio indicate?

Answer 29

Price-to-Earnings Ratio measure price of a stock to its earnings. It indicates how much investors are willing to pay for each dollar the company earns.

Question 30

Describe Top-Down vs Bottom-Up Investing

Answer 30

Top-Down approach takes a broad analysis of the economy first. Bottom-Up uses fundamental analysis and involves evaluating individual companies.

Question 31

What's the difference between GNP and GDP?

Answer 31

GNP measures total value of all goods and services produced domestically and by US companies overseas. GDP is the output of goods and services in the US.

Question 32

What is *real* GDP?

Answer 32

GDP adjusted for inflation using constant dollars.

Question 33

What are the 4 Coincident Economic Indicators?

Answer 33

1. Employees on non-agricultural payrolls. 2. Personal income less transfer payments. 3. The Index of Industrial Production. 4. Manufacturing and trade sales

Question 34

What is Prime Rate?

Answer 34

This is what commercial banks charge their best corporate clients

Question 35

What is Discount Rate?

Answer 35

This is what the FRB (Federal Reserve Board) charges when depository institutions borrow from it.

Question 36

What is Federal Funds Rate?

Answer 36

This is what's charged on an overnight loan of reserves between member banks.

Question 37

What is Call Rate?

Answer 37

This is what commercial banks charge on collateralized loans to broker-dealers (for margin purposes).

Question 38

What is the order of lowest-highest of the most important interest rates?

Answer 38

From lowest to highest: Federal Funds Rate, Discount Rate, Call Rate, and Prime Rate.

Question 39

What does Keynesian Economic Theory state?

Answer 39

That government intervention in the economy is necessary for sustained economic growth and stability.

Question 40

Who sets Fiscal Policy

Answer 40

the President and Congress - primarily focuses on economic growth and high employment

Question 41

Who implements Monetary Policy? And what do they primarily focus on?

Answer 41

The Federal Reserve System - primarily focuses on controlling inflation.

Question 42

As foreign countries become wealthier, does the US dollar strengthen or weaken?

Answer 42

The US dollar strengthens - consumers tend to purchase more goods in general