Fundamental and Technical Analysis Flashcards
Is the Dow Jones Industrial Average considered broad or narrow?
Broad
How would the issuance of stock affect a company’s balance sheet?
1) Current assets (cash) is increased and 2) Shareholder’s Equity is increased (Working capital is increased)
Identify the following formula: Total Assets = Total Liabilities + Shareholder’s Equity
Balance Sheet Equation
What ratio tests a company’s ability to pay its current liabilities with its current assets, but excludes inventory?
The Quick Asset Ratio (the Acid Test)
An increase in odd lot buying is a _________ indicator.
An increase in odd lot buying is a bearish indicator.
Identify the following formula: Annual dividend ÷ EPS
Dividend payout ratio
The breakout of an area of resistance is a __________ indicator.
The breakout of an area of resistance is a bullish indicator.
True or False: Fundamental analysis focuses on analyzing the market using charts, patterns, trends, and short interest.
False. Charts, trends, pattern analysis, and theories would be the focus of a technical analyst.
True or False: The head and shoulders patterns are indicative of the reversal of a trend.
True
____________ level is the price level at which point a stock stops increasing.
Resistance level is the price level at which point a stock stops increasing.
True or False: According to CAPM, a security’s return equals a risk-free return (T-Bill return) plus a risk premium.
True
How is cash flow calculated?
Net income plus depreciation. Depreciation is added back, since it is a non-cash expense.
True or False: The Efficient Market Theory indicates that, through analysis, undervalued situations can be discovered.
False
The _________ Theory states that small public investors are generally wrong.
The Odd Lot Theory states that small public investors are generally wrong.
To find a stock’s current yield, the formula is: ____________ ÷ ____________
To find a stock’s current yield, the formula is: Annual Dividend ÷ Current Market Price
If given a stock’s P/E ratio and market price from a stock table, how is EPS calculated?
Market price ÷ P/E ratio
True or False: The Wilshire Associates Index is considered the broadest of the broad-based indexes.
True
Working Capital, Current Ratio, and the Quick Asset Ratio (Acid Test) are examples of ____________ ratios.
Working Capital, Current Ratio, and the Quick Asset Ratio (Acid Test) are examples of liquidity ratios.
What theory states that all known relevant information is reflected in a security’s price?
Efficient Market Theory (also called the Random Walk Theory)
What theory analyzes the amount of a company’s stock that has been shorted and not yet covered?
Short Interest Theory
A large short interest is a __________ indicator.
A large short interest is a bullish indicator.
Is the head and shoulders top formation the reversal of an upward or downward trend?
Upward
What is the beta of the market (S and P 500)?
1
____________ ÷ ____________ = Current Ratio
Current Assets ÷ Current Liabilities = Current Ratio
How would the declaration of a dividend affect a company’s balance sheet?
1) Retained earnings is reduced and 2) Current liabilities is increased (working capital is reduced)
A head and shoulders top formation is considered a __________ indicator.
A head and shoulders top formation is considered a bearish indicator.
How would the payment of a dividend affect a company’s balance sheet?
1) Current assets (cash) is reduced and 2) Current liabilities is reduced (working capital stays the same)
______ is the measure of an asset’s volatility compared to the market as a whole.
Beta is the measure of an asset’s volatility compared to the market as a whole.
According to The Dow Theory, what two averages must reach a new high or new low to confirm a major trend?
Dow Jones Industrial Average and Dow Jones Transportation Average
__________ level is the price level at which point a stock stops decreasing.
Support level is the price level at which point a stock stops decreasing.
Is the head and shoulders bottom formation the reversal of an upward or downward trend?
Downward
(Current Assets - ____________) ÷ Current Liabilities = Quick Asset Ratio (or Acid Test)
(Current Assets - Inventory) ÷ Current Liabilities = Quick Asset Ratio (or Acid Test)
The analysis of a specific company (its balance sheet, income statement, etc.) are the focus of the ___________ analyst.
The analysis of a specific company (its balance sheet, income statement, etc.) are the focus of the fundamental analyst.
What is the Capital Asset Pricing Model (CAPM)?
A model of the relationship between expected risk and expected return
A head and shoulders bottom formation is considered a __________ indicator.
A head and shoulders bottom formation is considered a bullish indicator.
Identify the following formula: Stock’s market price ÷ EPS
Price/Earnings (P/E) Ratio (also called the earnings multiple)
The Dow Jones Composite Average comprises ____ industrial stocks, ____ transportation stocks, and ____ utility stocks.
The Dow Jones Composite Average comprises 30 industrial stocks, 20 transportation stocks, and 15 utility stocks.
If an asset outperforms the market when prices are up, but underperforms when prices are down, what is its beta?
Its beta must be greater than 1.00.
An increase in odd lot selling is a _________ indicator.
An increase in odd lot selling is a bullish indicator.
Identify the following formula: (Net income - preferred dividends) ÷ Common shares outstanding
Earnings Per Share (EPS)
How would the issuance of debt affect a company’s balance sheet?
1) Current assets (cash) is increased and 2) Long-term liabilities is increased (Working capital is increased)
The breakout of an area of support is a __________ indicator.
The breakout of an area of support is a bearish indicator.
____________ - ____________ = Working Capital
Current Assets - Current Liabilities = Working Capital
