Finance

Question 1

What is a stock?

Answer 1

A stock is a share in the ownership of a company.

Question 2

True or False: Stocks are always a safe investment.

Answer 2

False

Question 3

What does it mean to ‘go public’?

Answer 3

Going public refers to the process of a company offering its shares to the public through an initial public offering (IPO).

Question 4

Fill in the blank: A __________ is the market where stocks are bought and sold.

Answer 4

stock exchange

Question 5

Which of the following is NOT a stock exchange? A) NYSE B) NASDAQ C) FOREX

Answer 5

C) FOREX

Question 6

What does ‘dividend’ refer to in the context of stocks?

Answer 6

A dividend is a portion of a company’s earnings distributed to shareholders.

Question 7

True or False: A stock’s price can be influenced by market demand and supply.

Answer 7

True

Question 8

What is a bull market?

Answer 8

A bull market is a period during which stock prices are rising or are expected to rise.

Question 9

What is a bear market?

Answer 9

A bear market is a period during which stock prices are falling or are expected to fall.

Question 10

Short answer: What is market capitalization?

Answer 10

Market capitalization is the total market value of a company’s outstanding shares of stock.

Question 11

Fill in the blank: A __________ order is an order to buy or sell a stock at the current market price.

Answer 11

market

Question 12

What is the purpose of a stockbroker?

Answer 12

A stockbroker is a professional who buys and sells stocks on behalf of clients.

Question 13

True or False: All stocks pay dividends.

Answer 13

False

Question 14

What is a stock split?

Answer 14

A stock split is a corporate action that increases the number of shares outstanding while decreasing the share price.

Question 15

What does ‘IPO’ stand for?

Answer 15

Initial Public Offering

Question 16

Short answer: What is a blue-chip stock?

Answer 16

A blue-chip stock is a stock of a well-established and financially sound company with a history of reliable performance.

Question 17

Fill in the blank: An __________ is a financial instrument that represents an ownership position in a corporation.

Answer 17

equity

Question 18

What is the significance of the P/E ratio?

Answer 18

The P/E (price-to-earnings) ratio is a valuation measure comparing a company’s current share price to its per-share earnings.

Question 19

True or False: A higher P/E ratio indicates that a stock is undervalued.

Answer 19

False

Question 20

What does ‘short selling’ mean?

Answer 20

Short selling is the practice of selling stocks that the seller does not own, with the intention of buying them back at a lower price.

Question 21

What is a limit order?

Answer 21

A limit order is an order to buy or sell a stock at a specified price or better.

Question 22

Fill in the blank: __________ is the practice of spreading investments across various financial instruments to reduce risk.

Answer 22

Diversification

Question 23

What is a market index?

Answer 23

A market index is a statistical measure that reflects the composite value of a selected group of stocks.

Question 24

True or False: The Dow Jones Industrial Average includes only technology companies.

Answer 24

False

Question 25

What is insider trading?

Answer 25

Insider trading refers to buying or selling a stock based on non-public information about the company.

Question 26

What is equity?

Answer 26

Equity refers to the ownership of assets after all liabilities have been deducted.

Question 27

True or False: Equity is the same as equality.

Answer 27

False.

Question 28

Fill in the blank: Equity is often associated with _____ justice.

Answer 28

social

Question 29

What are the two main types of equity in finance?

Answer 29

Common equity and preferred equity.

Question 30

Which of the following is a characteristic of common equity? (a) Fixed dividends (b) Voting rights (c) Priority in liquidation

Answer 30

b) Voting rights

Question 31

What does the term 'equity financing' refer to?

Answer 31

Raising capital through the sale of shares.

Question 32

True or False: Equity holders have a claim on the company's assets in the event of liquidation.

Answer 32

True.

Question 33

What is the formula for calculating equity?

Answer 33

Equity = Assets - Liabilities.

Question 34

Fill in the blank: The _____ Act aims to promote equity in lending practices.

Answer 34

Equal Credit Opportunity

Question 35

What is the difference between equity and debt?

Answer 35

Equity represents ownership, while debt represents a loan that must be repaid.

Question 36

Multiple Choice: Which of the following is NOT a component of equity? (a) Retained earnings (b) Preferred shares (c) Accounts payable

Answer 36

c) Accounts payable

Question 37

What is 'equity research'?

Answer 37

Analysis of stocks to determine their value and investment potential.

Question 38

True or False: Equity can only be issued by public companies.

Answer 38

False.

Question 39

What does 'equity stake' mean?

Answer 39

The percentage of ownership a shareholder has in a company.

Question 40

Fill in the blank: In a corporation, equity is often represented by _____ shares.

Answer 40

stock

Question 41

What is 'equity crowdfunding'?

Answer 41

A method of raising capital where individuals invest in startup companies in exchange for equity.

Question 42

True or False: Preferred equity has a higher claim on assets than common equity.

Answer 42

True.

Question 43

What does the term 'equity market' refer to?

Answer 43

The marketplace for buying and selling equity securities.

Question 44

Multiple Choice: Which of the following is a benefit of equity financing? (a) No obligation to repay (b) Fixed interest payments (c) Lower ownership dilution

Answer 44

a) No obligation to repay

Question 45

What is 'home equity'?

Answer 45

The market value of a homeowner's interest in their property.

Question 46

Fill in the blank: The _____ ratio measures a company's equity relative to its total assets.

Answer 46

equity

Question 47

What is 'equity compensation'?

Answer 47

Payment to employees in the form of stock or stock options.

Question 48

True or False: Equity represents a fixed return on investment.

Answer 48

False.

Question 49

What role does equity play in a company's capital structure?

Answer 49

Equity provides a buffer against loss and supports growth.

Question 50

What is the primary objective of equity research analysts?

Answer 50

To provide investment recommendations based on stock valuations.

Question 51

Fill in the blank: Equity is important for _____ as it reflects the financial health of a business.

Answer 51

investors

Question 52

What is negative gearing?

Answer 52

Negative gearing is an investment strategy where the costs of owning an investment property exceed the income it generates.

Question 53

True or False: Negative gearing can result in tax benefits for investors.

Answer 53

True

Question 54

Fill in the blank: In negative gearing, the property is often held for __________ appreciation.

Answer 54

capital

Question 55

What type of investment is commonly associated with negative gearing?

Answer 55

Real estate

Question 56

Multiple choice: Which of the following is a potential advantage of negative gearing? A) Immediate cash flow B) Tax deductions C) Guaranteed property value increase

Answer 56

B) Tax deductions

Question 57

What is the primary risk associated with negative gearing?

Answer 57

The risk of property value depreciation.

Question 58

True or False: Negative gearing is only applicable to residential properties.

Answer 58

False

Question 59

Fill in the blank: Investors use negative gearing to offset __________ against their taxable income.

Answer 59

losses

Question 60

What is a common requirement for an investment to be negatively geared?

Answer 60

The property must generate lower income than its expenses.

Question 61

Multiple choice: Which country is known for its negative gearing policies? A) Canada B) Australia C) Japan

Answer 61

B) Australia

Question 62

What is the term for the opposite of negative gearing, where income exceeds expenses?

Answer 62

Positive gearing

Question 63

True or False: Negative gearing can lead to a higher level of investment risk.

Answer 63

True

Question 64

Fill in the blank: The __________ tax deduction is a key benefit of negative gearing.

Answer 64

income

Question 65

What financial aspect do investors need to carefully manage in a negatively geared property?

Answer 65

Cash flow

Question 66

Multiple choice: Which of the following is NOT a typical expense in negative gearing? A) Interest on loans B) Property management fees C) Capital gains tax

Answer 66

C) Capital gains tax

Question 67

What is a common reason investors choose to negatively gear properties?

Answer 67

To potentially benefit from long-term capital gains.

Question 68

True or False: Negative gearing is a strategy that guarantees profits.

Answer 68

False

Question 69

Fill in the blank: The __________ of an investment property affects its potential for negative gearing.

Answer 69

location

Question 70

What is a potential impact of changes in interest rates on negatively geared properties?

Answer 70

Increased costs can reduce tax benefits and cash flow.

Question 71

Multiple choice: Which group of investors is most likely to use negative gearing? A) Retirees B) Young professionals C) High-income earners

Answer 71

C) High-income earners

Question 72

What is the effect of negative gearing on taxable income?

Answer 72

It reduces taxable income by allowing loss deductions.

Question 73

True or False: All countries allow negative gearing as a tax strategy.

Answer 73

False

Question 74

Fill in the blank: The __________ of a property is a critical factor in assessing the viability of negative gearing.

Answer 74

yield

Question 75

What should an investor consider before negatively gearing a property?

Answer 75

Overall investment strategy and risk tolerance.

Question 76

Multiple choice: Negative gearing is more beneficial in a __________ market. A) Declining B) Stable C) Rising

Answer 76

C) Rising

Question 77

What is one common method investors use to calculate the benefits of negative gearing?

Answer 77

Cash flow analysis.