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Series 7 > Securities Analysis > Flashcards

Securities Analysis Flashcards

1
Q

Fundamental analysis

A

What to buy

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2
Q

Technical analysis

A

When to buy

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3
Q

Types of risk

A

Market/systematic, business/nonsystematic, credit, call risk, liquidity, interest rate, reinvestment, inflationary, capital, regulatory, currency, political, prepayment, timing

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4
Q

10k and 10q include:

A

Balance sheet, income statement, cash flows

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5
Q

Balance sheet equation

A

Assets = liabilities + stockholders equity

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6
Q

Current assets

A

Convertible into cash w/in 1 yr, cash, securities, accts rec, prepaid expenses, inventory

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7
Q

Fixed assets

A

Not easily converted into cash, land, machinery, equipment

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8
Q

Intangible assets

A

Non physical, reputation, trademarks, goodwill, patents

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9
Q

Current liabilities

A

Debt obligations owed w/in 1 yr: accts payable, wages, notes payable, taxes, dividends, interest, bonds maturing,

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10
Q

Balance sheet formula

Working capital

A

Current assets - current liabilities

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11
Q

Balance sheet formula

Current ratio

A

Current assets/current liabilities

Should be at least 2 to 1 to be liquid

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12
Q

Balance sheet formula

Quick ratio

A

All current assets (less inventory and prepaid expenses)/current liabilities

Measures liquidity of company w/in 3-5 mos, should be at least 1 to 1 to be liquid

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13
Q

Balance sheet formula

Net worth

A

Total assets - total liabilities

Same as stock holders equity

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14
Q

Paid in capital

A

The amount over par value that a company receives for issuing stock

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15
Q

Retained earnings

A

Amount of money a company has after paying all expenses, interest, taxes, and dividends.

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16
Q

Inventory T/O

A

Sales compared to value of inventory measured annually

Sales/avg inventory

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17
Q

Bond (debt) ratio

A

LT liabilities/total capitalization

i.e. Bonds/stocks

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18
Q

Income statement

EPS

A

Net income - pref divs/# of common shares outstanding

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19
Q

Income statement

PE

A

Price earnings ratio

Mkt price/eps

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20
Q

Income statement

Div payout ratio

A

Annual div per common share/ eps

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21
Q

Income statement

Gross profit margin

A

Net sales - cost of goods sold - operating expenses/ net sales

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22
Q

Income statement

Cash flow

A

Net income+depreciation +depletion+amortization

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23
Q

Income statement

Depreciation

A

Tax write off, considered operating expense

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24
Q

Income statement

Current stock yield

A

Annual div/mkt price

Use the ask

25
Q

Income statement

Bond interest coverage

A

EBIT/bond interest

How much money to cover expenses

26
Q

Income statement

Net profit margin

A

Net income/net sales

27
Q

Interest rate indicators 5

A
  1. Reserve requirements - can’t be loaned to customers
  2. Discount rate - fed rate for member banks
  3. Fed funds rate - Rates btwn banks, b/d’s, institutions, lowest, most volatile
  4. Call loan rate - rates on margin accounts
  5. Prime rate - rate for best customers
28
Q

M1

A

Currency in circulation, checking accts

29
Q

M2

A

M1 + savings deposits, money mkt, short term debt

30
Q

M3

A

M2 + jumbo cd’s

31
Q

Balance of payments

A

Reflects the amount of money coming into country vs out

32
Q

Interbank mkt

A

Unregulated decentralized for foreign currency transactions

33
Q

Spot mkt

A

Interbank transactions, 2 parties agree to trade foreign currencies, delivery 1 to 2 days

34
Q

Forward mkt

A

Same as spot mkt but longer time frame, usually several months

35
Q

Floating exchange rate

A

Values based in supply and demand vs other currencies

36
Q

Recession

A

Mild 6 month/2 qtr in biz activity and stock prices

37
Q

Depression

A

6 qtr/18 month economic decline

38
Q

Cpi

A

Measures changes in the price of goods, in certain cities each month

39
Q

Stagflation

A

Inflation increases in a slow economy (particularly w/raw materials)

40
Q

Gdp

A

Sum of all goods and services produced, measured in constant dollars (considers inflation)

41
Q

Disintermediation

A

Movement of money from savings to money mkt/short term bonds

Occurs during periods of tight money

42
Q

Fiscal policy

A

Taxes and govt spending (controlled by congress)

43
Q

Keynesian

A

Governments should be active through spending to foster economic growth

44
Q

Supply side

A

Belief the government should be passive and economy will grow by itself

45
Q

Monetarist

A

Belief money supply needs to be properly controlled for economy to prosper

46
Q

Moral suasion

A

Chairman of the fed asks banks to expand or contract lending

47
Q

Leading indicators

A
  • Money supply M1, M2, M3
  • stocks
  • fed funds
  • discount rate
  • reserve req’t
  • housing (permits/new starts)
  • unemployment
  • avg hrs worked
  • durable goods orders
  • consumer sentiment
  • yield curve
48
Q

Lagging indicators

A
  • prime rate
  • industrial/commercial loans
  • Corp profits
  • consumer credit
  • personal income
  • duration of unemployment
  • unemployment rate
  • inventories
  • sales
49
Q

Coincidental indicators

A
  • industrial production
  • personal income
  • gasp
  • retail sales
50
Q

Breakout

A

Technical indicator when prices break out of normal trading rang by more than 3% above resistance or below support

51
Q

Odd lot theory

A

Small investor is usually wrong, small investor is usually wrong

52
Q

Random walk

A

Assumes mkt is perfectly efficient, aka efficient mkt theory

53
Q

CAPM

A

Shows relationship btwn expected risk and expected return

T-Bill return + [(s&p 500 expected return - T-Bill) x beta]

54
Q

Mkt weighted index

A

Positions in index calculated by mkt cap

Most common

55
Q

Price weighted index

A

The higher the price, the greater the weight

56
Q

Non weighted index

A

All stocks equally weighted

Value line

57
Q

Circuit breakers

A

Level 1 - 7% decline, 15 min halt

Level 2 - 13% decline 15 min halt

Level 3 - 20% decline closed rest of day

58
Q

The rate controlled directly by the FED?

A

Discount rate

59
Q

Most common tool used by the FED to control money supply

A

Once

Series 7 (13 decks)

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