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Series 7 > chapter 23 > Flashcards

chapter 23 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

______ is the measure of an asset’s volatility compared to the market as a whole.

A

Beta

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2
Q

What is the beta of the market (S&P 500)?

A

1

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3
Q

If an asset outperforms the market when prices are up/underperforms when prices are down, its beta is _____ than 1.00.

A

greater

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4
Q

True or False: Fundamental analysis focuses on analyzing the market using charts, patterns, trends, and short interest.

A

False. This is Technical Analysis

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5
Q

The analysis of a specific company (its balance sheet, income statement, etc.) are the focus of the ___________ analyst.

A

Fundamental

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6
Q

____________ - ____________ = Working Capital

A

Current Assets - Current Liabilities = Working Capital

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7
Q

____________ ÷ ____________ = Current Ratio

A

Current Assets ÷ Current Liabilities = Current Ratio

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8
Q

This tests a company’s ability to pay its current liabilities with its current assets but does not include inventory.

A

Quick Asset Ratio

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9
Q

(Current Assets - ____________) ÷ Current Liabilities = Quick Asset Ratio (or Acid Test)

A

(Current Assets - Inventory) ÷ Current Liabilities = Quick Asset Ratio (or Acid Test)

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10
Q

Working Capital, Current Ratio, and the Quick Asset Ratio (Acid Test) are examples of ____________ ratios.

A

liquidity ratios

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11
Q

Identify the following formula: (Net income - preferred dividends) ÷ Common shares outstanding

A

Earnings per Share

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12
Q

To find a stock’s current yield, the formula is: ____________ ÷ ____________

A

Annual Dividend ÷ Current Market Price

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13
Q

Identify the following formula: Stock’s market price ÷ EPS

A

Price to Earnings

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14
Q

Identify the following formula: Annual dividend ÷ EPS

A

Dividend payout ratio

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15
Q

How would the declaration of a dividend affect a company’s balance sheet?

A

1) Retained earnings is reduced and 2) Current liabilities is increased (working capital is reduced)

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16
Q

How would the payment of a dividend affect a company’s balance sheet?

A

1) Current assets (cash) is reduced and 2) Current liabilities is reduced (working capital stays the same)

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17
Q

Identify the following formula: Total Assets = Total Liabilities + Shareholder’s Equity

A

Balance Sheet Equation

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18
Q

What is the Capital Asset Pricing Model (CAPM)?

A

A model of the relationship between expected risk and expected return

19
Q

True or False: According to CAPM, a security’s return equals a risk-free return (T-Bill return) plus a risk premium.

A

True

20
Q

What theory analyzes the amount of a company’s stock that has been shorted and not yet covered?

A

short interest theory

21
Q

A large short interest is a __________ indicator.

A

bullish

22
Q

The _________ Theory states that small public investors are generally wrong.

A

Odd Lot

23
Q

An increase in odd lot buying is a _________ indicator.

A

bearish

24
Q

An increase in odd lot selling is a _________ indicator.

A

bullish

25
Q

What theory states that all known relevant information is reflected in a security’s price?

A

Efficient Market Theory or Random Walk Theory

26
Q

True or False: The Efficient Market Theory indicates that, through analysis, undervalued situations can be discovered.

A

False

27
Q

According to The Dow Theory, what two averages must reach a new high or new low to confirm a major trend?

A

Dow Jones Industrial Average and Dow Jones Transportation Average

28
Q

The Dow Jones Composite Average comprises ____ industrial stocks, ____ transportation stocks, and ____ utility stocks.

A

30/20/15

29
Q

____________ level is the price level at which point a stock stops increasing.

A

Resistance

30
Q

__________ level is the price level at which point a stock stops decreasing.

A

Support

31
Q

True or False: The head and shoulders patterns are indicative of the reversal of a trend.

A

true

32
Q

Is the head and shoulders top formation the reversal of an upward or downward trend?

A

upward

33
Q

A head and shoulders top formation is considered a __________ indicator.

A

bearish

34
Q

Is the head and shoulders bottom formation the reversal of an upward or downward trend?

A

downward

35
Q

A head and shoulders bottom formation is considered a __________ indicator.

A

bullish

36
Q

If given a stock’s P/E ratio and market price from a stock table, how is EPS calculated?

A

Market price ÷ P/E ratio

37
Q

How is cash flow calculated?

A

Net income plus depreciation. Depreciation is added back, since it is a non-cash expense

38
Q

How would the issuance of debt affect a company’s balance sheet?

A

1) Current assets (cash) is increased and 2) Long-term liabilities is increased (Working capital is increased)

39
Q

How would the issuance of stock affect a company’s balance sheet?

A

1) Current assets (cash) is increased and 2) Shareholder’s Equity is increased (Working capital is increased)

40
Q

The breakout of an area of resistance is a __________ indicator.

A

bullish

41
Q

The breakout of an area of support is a __________ indicator.

A

bearish

42
Q

True or False: The Wilshire Associates Index is considered the broadest of the broad-based indexes.

A

True

43
Q

Is the Dow Jones Industrial Average considered broad or narrow?

A

Broad

Series 7 (25 decks)

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