Securities Analysis Flashcards Preview

Series 7 > Securities Analysis > Flashcards

Flashcards in Securities Analysis Deck (59):
1

Fundamental analysis

What to buy

2

Technical analysis

When to buy

3

Types of risk

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

4

10k and 10q include:

Balance sheet, income statement, cash flows

5

Balance sheet equation

Assets = liabilities + stockholders equity

6

Current assets

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

7

Fixed assets

Not easily converted into cash, land, machinery, equipment

8

Intangible assets

Non physical, reputation, trademarks, goodwill, patents

9

Current liabilities

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

10

Balance sheet formula

Working capital

Current assets - current liabilities

11

Balance sheet formula

Current ratio

Current assets/current liabilities

Should be at least 2 to 1 to be liquid

12

Balance sheet formula

Quick ratio

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

13

Balance sheet formula

Net worth

Total assets - total liabilities

Same as stock holders equity

14

Paid in capital

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

15

Retained earnings

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

16

Inventory T/O

Sales compared to value of inventory measured annually

Sales/avg inventory

17

Bond (debt) ratio

LT liabilities/total capitalization

i.e. Bonds/stocks

18

Income statement

EPS

Net income - pref divs/# of common shares outstanding

19

Income statement

PE

Price earnings ratio

Mkt price/eps

20

Income statement

Div payout ratio

Annual div per common share/ eps

21

Income statement

Gross profit margin

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

22

Income statement

Cash flow

Net income+depreciation +depletion+amortization

23

Income statement

Depreciation

Tax write off, considered operating expense

24

Income statement

Current stock yield

Annual div/mkt price

Use the ask

25

Income statement

Bond interest coverage

EBIT/bond interest

How much money to cover expenses

26

Income statement

Net profit margin

Net income/net sales

27

Interest rate indicators 5

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

M1

Currency in circulation, checking accts

29

M2

M1 + savings deposits, money mkt, short term debt

30

M3

M2 + jumbo cd's

31

Balance of payments

Reflects the amount of money coming into country vs out

32

Interbank mkt

Unregulated decentralized for foreign currency transactions

33

Spot mkt

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

34

Forward mkt

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

35

Floating exchange rate

Values based in supply and demand vs other currencies

36

Recession

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

37

Depression

6 qtr/18 month economic decline

38

Cpi

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

39

Stagflation

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

40

Gdp

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

41

Disintermediation

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

Occurs during periods of tight money

42

Fiscal policy

Taxes and govt spending (controlled by congress)

43

Keynesian

Governments should be active through spending to foster economic growth

44

Supply side

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

45

Monetarist

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

46

Moral suasion

Chairman of the fed asks banks to expand or contract lending

47

Leading indicators

- 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

Lagging indicators

- prime rate
- industrial/commercial loans
- Corp profits
- consumer credit
- personal income
- duration of unemployment
- unemployment rate
- inventories
- sales

49

Coincidental indicators

- industrial production
- personal income
- gasp
- retail sales

50

Breakout

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

51

Odd lot theory

Small investor is usually wrong, small investor is usually wrong

52

Random walk

Assumes mkt is perfectly efficient, aka efficient mkt theory

53

CAPM

Shows relationship btwn expected risk and expected return

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

54

Mkt weighted index

Positions in index calculated by mkt cap

Most common

55

Price weighted index

The higher the price, the greater the weight

56

Non weighted index

All stocks equally weighted

Value line

57

Circuit breakers

Level 1 - 7% decline, 15 min halt

Level 2 - 13% decline 15 min halt

Level 3 - 20% decline closed rest of day

58

The rate controlled directly by the FED?

Discount rate

59

Most common tool used by the FED to control money supply

Once