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Flashcards in Portfolio/Fixed Income Basics Deck (21):
1

A fundamental analyst will examine what

- Outlook for the industry
- Management of the company
- Product lines of the company
- Anticipated introduction of new products
- Market share of the company

2

Assets - Liabilities = ??

Net worth

3

Assets = ? + ?

Liabilities + Net worth

4

Current Liabilities on a balance sheet consist of

Memory Tool: W A I T

- Wages Payable
- Accounts Payable
- Interest Payable
- Taxes Payable

5

Net Working Capital = ?? - ??

Current Assets - Current Liabilities

6

Current Ratio = ?? / ??

Ratio used to measure liquidity

Current assets / Current Liabilities

7

What is the formula for the Quick ratio?

(Ratio used to measure liquidity)

(Current assets - Inventory) / Current liabilities

8

Ratios that are used to measure liquidity include?

- Current Ratio
- Quick Ratio (Acid test)

9

PORTFOLIO CONSTRUCTION:

Blue Chip

Highest quality companies with proven earnings and dividend records

10

PORTFOLIO CONSTRUCTION:

Growth/Price/Earnings Ratio

Companies tat are in a period of above average growth due to rapid market expansion or unique products

11

PORTFOLIO CONSTRUCTION:

Emerging Growth

Brand new ventures of high risk but also high potential reward. These companies have no track record and typically do not pay dividends

12

PORTFOLIO CONSTRUCTION:

Income

Mature companies with high dividend payout ratios - such as utilities

13

PORTFOLIO CONSTRUCTION:

Cyclical

Companies whose fortunes track the business cycle closely

14

PORTFOLIO CONSTRUCTION:

Counter-Cyclical

Companies whose fortunes operate in reverse to the business cycle

15

PORTFOLIO CONSTRUCTION:

Defensive

A company which remains unaffected during business cycle downturns

16

PORTFOLIO CONSTRUCTION:

Speculative

Companies that fly high during the business cycle upturns (Feast and famine periods that mirror the business cycle)

17

PORTFOLIO CONSTRUCTION:

Special Situation

A company going through a takeover, restructuring, bankruptcy; or management change that will greatly change the nature of its operations

18

Total Return = ? + ?

Income + Growth

- Dividends for Equities
- Interest for Debt

19

Which method takes compounding into effect

Geometric average rate of return or Arithmetic average rate of return

Geometric average rate of return

20

An investment return of a company's stock varies directly with economic conditions - is what type of stock

Cyclical

21

Standard deviation of returns depends on the holding period of the investments. Thus:

The shorter the holding period __________________

The longer the holding period __________________

The shorter the holding period, the greater the variability of the return; and

The longer the holding period, the smaller the variability of the return.