Portfolio/Fixed Income Basics Flashcards
A fundamental analyst will examine what
- Outlook for the industry
- Management of the company
- Product lines of the company
- Anticipated introduction of new products
- Market share of the company
Assets - Liabilities = ??
Net worth
Assets = ? + ?
Liabilities + Net worth
Current Liabilities on a balance sheet consist of
Memory Tool: W A I T
- Wages Payable
- Accounts Payable
- Interest Payable
- Taxes Payable
Net Working Capital = ?? - ??
Current Assets - Current Liabilities
Current Ratio = ?? / ??
Ratio used to measure liquidity
Current assets / Current Liabilities
What is the formula for the Quick ratio?
Ratio used to measure liquidity
(Current assets - Inventory) / Current liabilities
Ratios that are used to measure liquidity include?
- Current Ratio
- Quick Ratio (Acid test)
PORTFOLIO CONSTRUCTION:
Blue Chip
Highest quality companies with proven earnings and dividend records
PORTFOLIO CONSTRUCTION:
Growth/Price/Earnings Ratio
Companies tat are in a period of above average growth due to rapid market expansion or unique products
PORTFOLIO CONSTRUCTION:
Emerging Growth
Brand new ventures of high risk but also high potential reward. These companies have no track record and typically do not pay dividends
PORTFOLIO CONSTRUCTION:
Income
Mature companies with high dividend payout ratios - such as utilities
PORTFOLIO CONSTRUCTION:
Cyclical
Companies whose fortunes track the business cycle closely
PORTFOLIO CONSTRUCTION:
Counter-Cyclical
Companies whose fortunes operate in reverse to the business cycle
PORTFOLIO CONSTRUCTION:
Defensive
A company which remains unaffected during business cycle downturns
PORTFOLIO CONSTRUCTION:
Speculative
Companies that fly high during the business cycle upturns (Feast and famine periods that mirror the business cycle)
PORTFOLIO CONSTRUCTION:
Special Situation
A company going through a takeover, restructuring, bankruptcy; or management change that will greatly change the nature of its operations
Total Return = ? + ?
Income + Growth
- Dividends for Equities
- Interest for Debt
Which method takes compounding into effect
Geometric average rate of return or Arithmetic average rate of return
Geometric average rate of return
An investment return of a company’s stock varies directly with economic conditions - is what type of stock
Cyclical
Standard deviation of returns depends on the holding period of the investments. Thus:
The shorter the holding period __________________
The longer the holding period __________________
The shorter the holding period, the greater the variability of the return; and
The longer the holding period, the smaller the variability of the return.
