Finance Flashcards
What is the balance sheet equation?
Assets- Liabilities= Net Worth
True or False: a balance sheet is dynamic.
False-It is Static
What is the income statement equation?
Revenue - expenses = profit
True or false: an income statement is dynamic.
True
On which statement do patents, copyrights, and goodwill appear? How are they classified?
On the balance sheet under intangible assets
On which statement do land, buildings and equipment appear?
On the balance sheet under fixed assets
On which statement to profits and losses appear?
Income statement
On which statement do revenues and expenses appear?
Income statement
On which statement do depletion and depreciation appear?
On both the income statement and balance sheet
What is the current ratio?
Current assets/current liabilities
What is liquidity/illiquidity?
Current assets exceed current liabilities and vice versa
A current ratio less than one indicates:
Illiquidity
Current ratio greater than one indicates:
Liquidity
Which statement shows a company’s net worth?
Balance sheet
What is solvency/insolvency?
when net worth is greater than zero or When net worth is less than zero
What is bankruptcy?
A court ruling of permanent or temporary relief
What is a chapter 7 bankruptcy?
Permanent relief for a firm or individual
What is a chapter 9 bankruptcy?
Temporary relief for municipalities or counties
What is a chapter 11 bankruptcy?
Temporary relief for a firm
What is a chapter 13 bankruptcy?
Temporary relief for an individual
An option to sell stock:
Put option
An option to buy stock:
Call option
Buying in the cheap and selling in a more expensive market is called:
Arbitrage
What is the difference between a bear market in a bull market?
Bear is pessimistic and Bull is optimistic
What is the difference between common and preferred stock?
Preferred stock has no voting rights
What is a round lot?
100 shares
What is an odd lot?
Anything that is not Purchased in a round lot (100 shares)
Purchases of additional shares as the price falls is known as:
Averaging down
Which market is the most important OTC market?
NASDAQ
Which market is referred to as the curb market?
AMEX
Which stock market is referred to as the big board?
NYSE
What is the order of the queue?
Price, size, time (PST)
How does price impact volatility?
High-price reduces volatility
How does debt impact volatility?
Low debt to equity ratio reduces volatility
How does beta impact volatility?
Low beta reduces volatility
How does blue-chip stocks impact volatility?
Blue-chip stocks are low volatility
What are the three elements of technical analysis?
Price, volume, time (PVT)
What is a fair bet?
A risk where the probability of success times the expected R/C ratio equals one. pX E=1
Note on gambling
ALWAYS take a small loss!
Marginal utility of what you gain when you gamble is always less than the marginal disutility of your loss
Forms of Leverage
Margin-Borrowing up to 50% Options-Put or call Warrants-Long term call options Debt to Equity Ratio- Purchasing stock of a company with a lot of debt on the books Personal Debt
Market Order
At current marker price
Limit Order
Not Less than X
Straddle
Put and a Call, betting on spread
Averaging Down
Buying additional shares of stock which one holds a position in, and which has dropped in price since the earlier purchase
Anti-cyclical
Buyer or seller behavior moves price of stock towards the moving average (stabilizing)
Pro-Cyclical
Behavior that moves price of stock away from the moving average (increases vagaries of the cycle)
Selling Short
Borrowing a security from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker.
Vigorish
How casinos make money. The 00s on the roulette table
Rules of Gambling
- P(E)>1
- Repetitive Gamble
- Always take a small loss
Arbitrage
A simultaneous transaction in two or more markets, buying in the cheap market and selling in the dear market.
Who was responsible for Probability Theory?
Keynes- Actuarial Tables
