quiz #13

Question 1

fundamental analysis

Answer 1

a method used to determine a company’s stock value by examining its financial and economic factors, such as revenues, profits, and overall industry conditions. This approach helps investors decide whether a stock is undervalued or overvalued, guiding their investment decisions.

Question 2

earnings per share

Answer 2

Earnings per share (EPS) is a financial metric that divides a company’s profit by the total number of outstanding shares of its stock. It provides an indication of a company’s profitability on a per-share basis, helping investors assess the financial health and earning power of the company.

Question 3

price-to earning ratio

Answer 3

The price-to-earnings (P/E) ratio is a financial metric that compares a company’s current share price to its per-share earnings. It indicates how much investors are willing to pay for each dollar of a company’s earnings, helping to assess if a stock is overvalued or undervalued relative to its earnings.

Question 4

return on equity

Answer 4

is a financial ratio that measures the profitability of a company in relation to its shareholders’ equity. It shows how effectively a company uses the money invested by its shareholders to generate earnings, providing insight into financial efficiency and performance.

Question 5

passive investment

Answer 5

is a strategy where investors buy and hold a mix of assets for the long term, typically using index funds or exchange-traded funds (ETFs) that mimic the performance of a market index. This approach involves minimal buying and selling and aims to achieve returns that closely mirror the overall market.

Question 6

active investment

Answer 6

Active investment involves frequent buying and selling of stocks, bonds, or other assets, with the goal of outperforming certain benchmarks or indices. This strategy relies on the investor’s ability to make timely decisions based on market analysis, economic trends, and individual asset performance.

Question 7

active investment advantages and disadvantages

Answer 7

advantages - 1. flexibility 2. potential higher returns 3. hedging strategies 4. tax
management
disadvantages - 1. higher costs 2. risk of managerial errors 3. active risk 4. dependence on manager skill

Question 8

passive investment advantages and disadvantages

Answer 8

advantages - 1. low fees, 2. transparency, 3. tax efficiency disadvantages 1. limited flexibility 2. capped returns 3. reliance on market performance 4. no defense against market downturns

Question 9

growth investing

Answer 9

Growth stocks are those of companies that are considered to have the potential to outperform the overall market over time because of their future potential.

Question 10

value investing

Answer 10

Value stocks are classified as companies that are currently trading below what they are really worth and will thus provide a superior return. Which category is better? T