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Series 7 > Economics > Flashcards

Economics Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Which of the following is NOT affected by the issuance of a bond?

A

Shareholders’ equity.

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2
Q

If a company issues $10 million in par value convertible debentures, all of the following balance sheet items will be affected EXCEPT:

A

net worth.

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3
Q

Which of the following would you most likely consider characteristics of a growth stock?

A

High PE and low dividend yield.

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4
Q

All of the following will affect the working capital of a corporation EXCEPT:

A

payment of a cash dividend.

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5
Q

Which of the following are methods used to manage the economy?

A

II. Monetary policy.

III. Fiscal policy.

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6
Q

Analysts who are most interested in confirming a market trend would use:

A

technical analysis.

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7
Q

According to technical analysis, when the market is consolidating, a chart showing the market trendline appears to be moving:

A

sideways within a narrow range.

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8
Q

Market interest rates have risen steadily over the past several months. The market price of which 2 of the following shares would probably reflect the biggest impact of this change?

A

III. Preferred stock.

IV. Public utility stock.

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9
Q

A customer buys XYZ stock at $60 per share. The stock is currently trading at a 10:1 price-to-earnings (PE) ratio. The firm declares a 3:1 stock split. What will the PE ratio be after the split if earnings remain unchanged?

A

10:1.

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10
Q

Which economic theory states that a reduced tax rate will result in a healthy economy that will in turn generate more taxes?

A

The Supply Side Economic Theory.

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11
Q

The immediate effect of the Federal Reserve’s buying and selling of securities in the marketplace is to:

A

make credit more or less available.

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12
Q

If the Federal Open Market Committee (FOMC) purchases T-bills in the open market, which of the following scenarios are likely to occur?

A

I. Secondary bond prices will rise.

II. Interest rates will fall.

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13
Q

ALFA Enterprises pays a quarterly dividend of $.15 and has earnings per share of $2.40. What is the dividend payout ratio?

A

25%.

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14
Q

If DMF Corporation issues $10 million par value of convertible debentures, all of the following balance sheet items will be affected immediately EXCEPT:

A

the net worth.

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15
Q

In the assessment of a company’s stock, a technical analyst takes into consideration all of the following EXCEPT:

A

earnings.

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16
Q

The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. New orders for durable goods is what kind of economic indicator?

A

Leading.

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17
Q

Buying stocks with high PE ratios normally reflects which of the following investment styles?

A

Growth.

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18
Q

KPT, Inc. is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income?

A

I. Tax rate.

II. Allowance for bad debts.

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19
Q

Which items would change if a company buys equipment for cash?

A

I. The working capital.

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20
Q

When the U.S. dollar appreciates, which of the following statements are TRUE?

A

I. Imports become more competitive with U.S. domestic goods.

II. U.S. exports become less competitive in foreign markets.

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21
Q

An inverted Head and Shoulders Formation would mean which of the following to a chartist?

A

A reversal of a downtrend.

22
Q

Which of the following would NOT be considered a defensive security?

A

Steel company stock.

23
Q

Which of the following risks would be of least concern to someone purchasing common shares of a foreign company?

A

Interest rate risk

24
Q

If a corporation has a dividend payout ratio of 70%, the undistributed earnings will:

A

increase retained earnings.

25
Q

A technical analyst is least concerned with:

A

declaration of increased dividends.

26
Q

Which of the following indicators reflects the current level of business activity?

A

Personal incomes.

27
Q

Disintermediation is a movement of funds which could result from all of the following EXCEPT:

A

the discount rate is decreased by FRB.

28
Q

The Conference Board releases information about the economy on a periodic basis. Included are a number of different indicators. These indicators can be used to predict how the economy as a whole might change. Which of the following would be considered a leading indicator?

A

Stock prices as measured by a broad index such as the S&P 500.

29
Q

Which of the following industries is most likely to be considered cyclical?

A

Durable goods.

30
Q

A company’s balance sheet dated December 31 shows retained earnings of $100,000. You can deduce from this information that the company:

A

has had $100,000 in undistributed profits since its inception.

31
Q

Which of the following would be considered in the fundamental analysis of a security?

A

III. Liquidity ratios.

IV. Historical earnings trends.

32
Q

Which of the following is a leading indicator of the economic future?

A

Machine tool orders.

33
Q

A company’s changing from straight line to accelerated depreciation will:

A

II. decrease income in the early years.

III. increase income in the later years.

34
Q

Which of the following would be of least interest to a technical analyst?

A

PE ratio.

35
Q

The issuance of a debenture by a company would have an immediate effect on which of the following balance sheet items?

A

I. The total assets.
II. The total liabilities.
III. The working capital.

36
Q

Statistics from which of the following industries are considered a leading indicator of economic growth?

A

New housing.

37
Q

Which of the following is a leading economic indicator?

A

S&P 500 index.

38
Q

Which of the following balance sheet entries may be affected when a company pays a cash dividend?

A

II. Total assets.

III. Total liabilities.

39
Q

The term “disintermediation” refers to:

A

the flow of money from traditional, low-yielding savings accounts to higher- yielding money market instruments.

40
Q

Which of the following would most likely be considered a leading economic indicator?

A

The S&P 500.

41
Q

The economy has gone through three consecutive quarters of economic decline with no immediate end in sight, and therefore could be said to be:

A

in a Recession.

42
Q

You note that “help wanted” advertisements in “The Wall Street Journal” have been increasing. This economic measure is a:

A

leading indicator.

43
Q

A corporation has $12 million net income after taxes, 5 million common shares outstanding, and $10 million of 6% preferred stock ($100 par). What is the corporation’s earnings per share (EPS)?

A

$2.28.

44
Q

ABC, with 3 million shares outstanding, reports after-tax earnings of $7.5 million. Annual cash dividends total $1 per share. The dividend payout ratio is:

A

40%.

45
Q

Which of the following is the most stringent test of liquidity?

A

(Cash + cash equivalents) / current liabilities.

46
Q

XYZ Corporation has a market price of $45 per share and earnings per share of $3 when XYZ announces a 3-for-1 split. After the split, the price-to-earnings ratio of XYZ will be:

A

15

47
Q

In what order do the following economic phases typically occur?

A

I. Recovery.
IV. Prosperity.
III. Decline.
II. Trough.

48
Q

If the Fed begins selling securities in the open market to tighten credit, what is the first interest rate to feel this change in the Fed policy?

A

Federal funds rate.

49
Q

Your customer wants to add 1 or 2 stocks of companies manufacturing household appliances to his portfolio. One of the tools he is using to compare companies to one another is the inventory turnover ratio. He makes all of the following correct statements to you EXCEPT

A

the ratio is always higher in industries dealing in durable goods like household appliances

50
Q

Which of the following may be affected when a company declares a cash dividend?

A

I. Shareholders’ equity.

II. Total liabilities.

Series 7 (15 decks)

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