Chapter 14 Part 5

Question 1

Form 10-Q of an SEC reporting company is required to be filed after

Answer 1

the end of each of the first three fiscal quarters of each fiscal year. Form 10-Q states in its instructions that no report need be filed for the fourth quarter of any fiscal year. The last quarter results are reported through the company’s Form 10-K-the annual report.

Question 2

Form 10-K, also referred to as the

Answer 2

annual report, will include information that a company is required to disclose to the SEC. This information is then available to the public. Some of the information includes: the business line and assets of the company, any legal proceedings in which the company is involved, risk factors, footnotes of accounting policies, the market for the company’s equity securities, and a list of the company’s directors and executive officers. The document gives a detailed overview of the past year’s results of the company and its business

Question 3

A proxy statement is filed when

Answer 3

a corporation intends to solicit proxies from shareholders regarding issues to be voted on at a shareholder meeting. These documents contain detailed information concerning proposed executive compensation, the percentage of the company owned by its executive officers, and the names of the company directors and their biographies

Question 4

Schedule 13D is filed according to

Answer 4

Section 13(d) of the Exchange Act. Anyone, including any entity, who acquires more than 5% of an issuer’s equity securities must notify the issuer, the exchange where the securities are traded, and the SEC within 10 days after the acquisition.

Question 5

Schedule 13G is

Answer 5

an alternative to Schedule 130 and is usually filed by institutional investors (e.g .. a mutual fund company) that have no intentions of influencing or controlling the issuer (passive investors).

Question 6

Schedule 13F is filed according to

Answer 6

SEC Rule 13f-1 of the Securities Exchange Act of 1934. This fmm is required to be filed quaiterly when institutional investment managers (for example, investment companies, holding companies, and hedge funds) exercise investment discretion over at least $100,000,000 in equity securities. The schedule includes information concerning the securities owned by the filer. This form must be filed regardless of whether the filer (e.g., a hedge fund) is registered with the SEC.

Question 7

Technical analysis is based on

Answer 7

viewing the past performance of a particular stock and/or index in order to identify trends or patterns. Unlike fundamental analysts, technical analysts do not review financial statements and other fundamental data to determine if the security is priced fairly. They believe that the price in the market reflects the information available. This information is used to make predictions as to the future price movement of a security

Question 8

The Dow Jones Averages are the most widely quoted measurements of the stock market. The Dow Jones Composite Average consists of

Answer 8

65 stocks.

Question 9

The Composite is broken down into three subaverages, as follows

Answer 9

Dow Jones Industrial Average, consisting of 30 stocks; Dow Jones Transportation Average, consisting of 20 stocks; Dow Jones Utility Average, consisting of 15 stocks

Question 10

The Dow Jones Industrial Average (DJIA) is the

Answer 10

most commonly quoted measure of the stock market. It contains 30 of the leading blue-chip companies that represent the backbone of industry in the United States. Included in this average are such companies as General Electric, AT&T, and IBM.

Question 11

The S&P 500 Index contains mostly NYSE stocks with some AMEX and Nasdaq stocks. This gives a broader measure of the market when compared to the Dow Jones Averages. Tbe S&P 500 Index consists approximately of:

Answer 11

400 industrial stocks, 20 transportation stocks, 40 financial stocks, 40 utility stocks

Question 12

The NYSE Composite Index contains all the

Answer 12

common stocks that arc listed on the New York Stock Exchange. It is further divided into four subindexes for industrial, transportation, financial, and utility issues

Question 13

The Wilshire Associates Equity Index consists of stocks that

Answer 13

trade on the New York Stock Exchange, American Stock Exchange, and Nasdaq. The index represents the dollar value of all the stocks. The Wilshire index is considered the broadest of all
indexes and averages.

Question 14

Major Market Index consists of

Answer 14

20 well-known, highly capitalized stocks. The Nasdaq Composite Index consists of all Nasdaq listed securities, and the Nasdaq 100 consists of 100 of the largest companies listed on Nasdaq.

Question 15

Volume figures show the

Answer 15

total number of shares traded for each security and the market

Question 16

Analysts consider it normal for stock prices to rise on

Answer 16

increasing volume. This occurrence does not signify a reversal in the market’s trend. However, a small price rise that is accompanied by decreasing volume is often considered the reversal of a trend and is, therefore, bearish

Question 17

The term market momentum is used to describe a situation where

Answer 17

prices are moving in a certain direction and there is a high level of trading volume. There is also an expectation that this pattern will continue in the near future. For example, if the S&P 500 Index has been trading up or down significantly over a period of days along with heavy trading volume, some traders will anticipate this pattern may continue for a few more days.

Question 18

Market neutral is used to describe

Answer 18

an attempt to profit by buying some securities while at the same time selling short others

Question 19

The Short Interest Theory The term short interest refers to the amount of a company’s shares of common stock that have been

Answer 19

sold short and have not yet been covered (closed out).

Question 20

those who follow the short interest theory normally consider a rising short interest to be

Answer 20

bullish. According to the short interest theory, short sellers must eventually cover their short sales. As they purchase the stock, this will cause the market price to increase. Other short
sellers, fearing future increases in a stock’s price, will cover their short sales creating additional upward pressure on the stock (commonly called a short squeeze). Therefore, increasing short interest has historically been considered a bullish indicator by a technical analyst.