Finance

Question 1

What is the balance sheet equation?

Answer 1

Assets- Liabilities= Net Worth

Question 2

True or False: a balance sheet is dynamic.

Answer 2

False-It is Static

Question 3

What is the income statement equation?

Answer 3

Revenue - expenses = profit

Question 4

True or false: an income statement is dynamic.

Answer 4

True

Question 5

On which statement do patents, copyrights, and goodwill appear? How are they classified?

Answer 5

On the balance sheet under intangible assets

Question 6

On which statement do land, buildings and equipment appear?

Answer 6

On the balance sheet under fixed assets

Question 7

On which statement to profits and losses appear?

Answer 7

Income statement

Question 8

On which statement do revenues and expenses appear?

Answer 8

Income statement

Question 9

On which statement do depletion and depreciation appear?

Answer 9

On both the income statement and balance sheet

Question 10

What is the current ratio?

Answer 10

Current assets/current liabilities

Question 11

What is liquidity/illiquidity?

Answer 11

Current assets exceed current liabilities and vice versa

Question 12

A current ratio less than one indicates:

Answer 12

Illiquidity

Question 13

Current ratio greater than one indicates:

Answer 13

Liquidity

Question 14

Which statement shows a company’s net worth?

Answer 14

Balance sheet

Question 15

What is solvency/insolvency?

Answer 15

when net worth is greater than zero or When net worth is less than zero

Question 16

What is bankruptcy?

Answer 16

A court ruling of permanent or temporary relief

Question 17

What is a chapter 7 bankruptcy?

Answer 17

Permanent relief for a firm or individual

Question 18

What is a chapter 9 bankruptcy?

Answer 18

Temporary relief for municipalities or counties

Question 19

What is a chapter 11 bankruptcy?

Answer 19

Temporary relief for a firm

Question 20

What is a chapter 13 bankruptcy?

Answer 20

Temporary relief for an individual

Question 21

An option to sell stock:

Answer 21

Put option

Question 22

An option to buy stock:

Answer 22

Call option

Question 23

Buying in the cheap and selling in a more expensive market is called:

Answer 23

Arbitrage

Question 24

What is the difference between a bear market in a bull market?

Answer 24

Bear is pessimistic and Bull is optimistic

Question 25

What is the difference between common and preferred stock?

Answer 25

Preferred stock has no voting rights

Question 26

What is a round lot?

Answer 26

100 shares

Question 27

What is an odd lot?

Answer 27

Anything that is not Purchased in a round lot (100 shares)

Question 28

Purchases of additional shares as the price falls is known as:

Answer 28

Averaging down

Question 29

Which market is the most important OTC market?

Answer 29

NASDAQ

Question 30

Which market is referred to as the curb market?

Answer 30

AMEX

Question 31

Which stock market is referred to as the big board?

Answer 31

NYSE

Question 32

What is the order of the queue?

Answer 32

Price, size, time (PST)

Question 33

How does price impact volatility?

Answer 33

High-price reduces volatility

Question 34

How does debt impact volatility?

Answer 34

Low debt to equity ratio reduces volatility

Question 35

How does beta impact volatility?

Answer 35

Low beta reduces volatility

Question 36

How does blue-chip stocks impact volatility?

Answer 36

Blue-chip stocks are low volatility

Question 37

What are the three elements of technical analysis?

Answer 37

Price, volume, time (PVT)

Question 38

What is a fair bet?

Answer 38

A risk where the probability of success times the expected R/C ratio equals one. pX E=1

Question 39

Note on gambling

Answer 39

ALWAYS take a small loss! Marginal utility of what you gain when you gamble is always less than the marginal disutility of your loss

Question 40

Forms of Leverage

Answer 40

``` Margin-Borrowing up to 50% Options-Put or call Warrants-Long term call options Debt to Equity Ratio- Purchasing stock of a company with a lot of debt on the books Personal Debt ```

Question 41

Market Order

Answer 41

At current marker price

Question 42

Limit Order

Answer 42

Not Less than X

Question 43

Straddle

Answer 43

Put and a Call, betting on spread

Question 44

Averaging Down

Answer 44

Buying additional shares of stock which one holds a position in, and which has dropped in price since the earlier purchase

Question 45

Anti-cyclical

Answer 45

Buyer or seller behavior moves price of stock towards the moving average (stabilizing)

Question 46

Pro-Cyclical

Answer 46

Behavior that moves price of stock away from the moving average (increases vagaries of the cycle)

Question 47

Selling Short

Answer 47

Borrowing a security from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker.

Question 48

Vigorish

Answer 48

How casinos make money. The 00s on the roulette table

Question 49

Rules of Gambling

Answer 49

1. P(E)>1 2. Repetitive Gamble 3. Always take a small loss

Question 50

Arbitrage

Answer 50

A simultaneous transaction in two or more markets, buying in the cheap market and selling in the dear market.

Question 51

Who was responsible for Probability Theory?

Answer 51

Keynes- Actuarial Tables