Unit 14

Question 1

Fill in the blanks with low or high:
Defensive stocks traditionally have _____ betas, _____ levels of retained earnings, _____ dividend payout ratios, and a _____ growth of earnings per share.

Answer 1

Defensive stocks traditionally have LOW betas, LOW levels of retained earnings, HIGH dividend payout ratios, and a LOW growth of earnings per share.

Question 2

New claims for unemployment insurance are considered to be a _________ economic indicator.

Answer 2

leading

Question 3

Debt-to-Equity Ratio

Answer 3

Measures a company’s leverage.
Total Debt ÷ Total Equity

Question 4

The balance sheet contains 3 main categories:

Answer 4

assets, liabilities, and net worth (stockholders’ equity)

Question 5

______________ is a method of adjusting financial values and economic performance for the changing value of a dollar.

Answer 5

Constant dollar

Also referred to as inflation-adjusted or real dollar

Question 6

The difference between a corporation’s current assets and its current liabilities is the:

Answer 6

Working capital

Question 7

What does the price-to-book ratio measure?

Answer 7

The market value of a company’s stock relative to the accounting value of the company

Question 8

A yield curve that rises as maturities lengthen is a

Answer 8

normal yield curve

Question 9

An individual who primarily invests in securities that have a low dividend payout ratio, a high level of retained earnings, and a high price-to-earnings ratio would be described as a:

Answer 9

growth investor

Question 10

The best measure of short-term liquidity is the __________, which is calculated by……………

Answer 10

current ratio; dividing current assets by current liabilities

Question 11

How is the book value of a company calculated?

Answer 11

Total Assets - Total Liabilities

Question 12

Earnings per share calculation

Answer 12

(Net Income – Preferred Dividends) ÷ Number of Outstanding Common Shares

Question 13

How to calculate Price-to-Earnings Ratio

Answer 13

Market price ÷ Earnings Per Share

Question 14

During which phase of the business cycle will an investor experience a decrease in purchasing power?

Answer 14

Peak

Question 15

If the U.S. dollar is in a decline against foreign currencies, U.S. goods will be (more/less) expensive to foreigners.

Answer 15

less

Question 16

The ____________ is what’s charged on an overnight loan of reserves between member banks.

Answer 16

Federal funds rate

Question 17

During periods of deflation, the FRB will likely:

Answer 17

Purchase securities in the open market

Question 18

When a company is financed with debt that is considered ______

Answer 18

leverage

Question 19

If an analyst wants to measure the degree to which a company or partnership is leveraged, he would calculate the _______

Answer 19

debt-to-capital or debt-to-equity ratio

Question 20

Short interest is a statistic used by _______ analysts.

Answer 20

technical

Question 21

The amount of money an issuer receives in a stock offering in excess of the par value is recorded on the balance sheet as:

Answer 21

capital surplus

Question 22

A recession occurs when Real GDP declines for __ successive quarters

Answer 22

2

Question 23

Value investing is risky because it is ______________

Answer 23

contrarian

Question 24

This is a company’s quarterly report that provides less detail than its Form 10-K. A
company must file it within 35 days of the end of each of its first three quarters. However, results for the last quarter are included in the company’s annual report.

Answer 24

Form 10-Q

Question 25

________ is filed with the SEC within four business days of the occurrence of any event that could materially affect a company’s share price or financial condition

Answer 25

Form 8-K