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Econ > Finance > Flashcards

Finance Flashcards

1
Q

What is the balance sheet equation?

A

Assets- Liabilities= Net Worth

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2
Q

True or False: a balance sheet is dynamic.

A

False-It is Static

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3
Q

What is the income statement equation?

A

Revenue - expenses = profit

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4
Q

True or false: an income statement is dynamic.

A

True

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5
Q

On which statement do patents, copyrights, and goodwill appear? How are they classified?

A

On the balance sheet under intangible assets

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6
Q

On which statement do land, buildings and equipment appear?

A

On the balance sheet under fixed assets

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7
Q

On which statement to profits and losses appear?

A

Income statement

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8
Q

On which statement do revenues and expenses appear?

A

Income statement

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9
Q

On which statement do depletion and depreciation appear?

A

On both the income statement and balance sheet

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10
Q

What is the current ratio?

A

Current assets/current liabilities

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11
Q

What is liquidity/illiquidity?

A

Current assets exceed current liabilities and vice versa

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12
Q

A current ratio less than one indicates:

A

Illiquidity

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13
Q

Current ratio greater than one indicates:

A

Liquidity

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14
Q

Which statement shows a company’s net worth?

A

Balance sheet

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15
Q

What is solvency/insolvency?

A

when net worth is greater than zero or When net worth is less than zero

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16
Q

What is bankruptcy?

A

A court ruling of permanent or temporary relief

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17
Q

What is a chapter 7 bankruptcy?

A

Permanent relief for a firm or individual

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18
Q

What is a chapter 9 bankruptcy?

A

Temporary relief for municipalities or counties

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19
Q

What is a chapter 11 bankruptcy?

A

Temporary relief for a firm

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20
Q

What is a chapter 13 bankruptcy?

A

Temporary relief for an individual

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21
Q

An option to sell stock:

A

Put option

22
Q

An option to buy stock:

A

Call option

23
Q

Buying in the cheap and selling in a more expensive market is called:

A

Arbitrage

24
Q

What is the difference between a bear market in a bull market?

A

Bear is pessimistic and Bull is optimistic

25
Q

What is the difference between common and preferred stock?

A

Preferred stock has no voting rights

26
Q

What is a round lot?

A

100 shares

27
Q

What is an odd lot?

A

Anything that is not Purchased in a round lot (100 shares)

28
Q

Purchases of additional shares as the price falls is known as:

A

Averaging down

29
Q

Which market is the most important OTC market?

A

NASDAQ

30
Q

Which market is referred to as the curb market?

A

AMEX

31
Q

Which stock market is referred to as the big board?

A

NYSE

32
Q

What is the order of the queue?

A

Price, size, time (PST)

33
Q

How does price impact volatility?

A

High-price reduces volatility

34
Q

How does debt impact volatility?

A

Low debt to equity ratio reduces volatility

35
Q

How does beta impact volatility?

A

Low beta reduces volatility

36
Q

How does blue-chip stocks impact volatility?

A

Blue-chip stocks are low volatility

37
Q

What are the three elements of technical analysis?

A

Price, volume, time (PVT)

38
Q

What is a fair bet?

A

A risk where the probability of success times the expected R/C ratio equals one. pX E=1

39
Q

Note on gambling

A

ALWAYS take a small loss!

Marginal utility of what you gain when you gamble is always less than the marginal disutility of your loss

40
Q

Forms of Leverage

A 
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
41
Q

Market Order

A

At current marker price

42
Q

Limit Order

A

Not Less than X

43
Q

Straddle

A

Put and a Call, betting on spread

44
Q

Averaging Down

A

Buying additional shares of stock which one holds a position in, and which has dropped in price since the earlier purchase

45
Q

Anti-cyclical

A

Buyer or seller behavior moves price of stock towards the moving average (stabilizing)

46
Q

Pro-Cyclical

A

Behavior that moves price of stock away from the moving average (increases vagaries of the cycle)

47
Q

Selling Short

A

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.

48
Q

Vigorish

A

How casinos make money. The 00s on the roulette table

49
Q

Rules of Gambling

A
  1. P(E)>1
  2. Repetitive Gamble
  3. Always take a small loss
50
Q

Arbitrage

A

A simultaneous transaction in two or more markets, buying in the cheap market and selling in the dear market.

51
Q

Who was responsible for Probability Theory?

A

Keynes- Actuarial Tables

Econ (7 decks)

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