Unit 14 Flashcards
In what order do the following economic phases typically occur?
Economists consider expansion (recovery) the beginning of the business cycle, followed by the peak (prosperity), contraction (decline), and trough.
Which of the following is most likely to be regarded as a defensive stock?
A food company stock
Identify the basic balance sheet equation.
Assets = liabilities + shareholders’ equity
Which of the following is a NOT a leading economic indicator?
Duration of unemployment
Which of the following is a leading economic indicator?
S&P 500 index
Which of the following indicators reflects the current level of business activity?
Personal incomes
Using technical analysis to value securities, which of the following items is NOT of importance?
The amount of a company’s past earnings
The amount of a company’s past earnings is a factor used in the fundamental analysis of securities, but not technical analysis. Technicians rely on market trends and supply and demand factors, as well as chart indications such as resistance and support levels.
Reference: 14.4 in the License Exam Manual
Which of the following industries is most likely to be considered cyclical?
Durable goods
A new corporation with no existing products or services has a patent pending with the U.S. government. Which of the following describes this type of company?
Special situation
A fundamental analyst would be concerned with all of the following EXCEPT
trading volumes
A fundamental analyst is concerned with the economic climate, the inflation rate, how an industry is performing, a company’s historical earnings trends, how it is capitalized, and its product lines, management, and balance sheet ratios. A technical analyst is concerned with trading volumes or market trends and prices.
Reference: 14.5 in the License Exam Manual
The Federal Reserve System is responsible for all of the following EXCEPT
setting the prime rate
The prime rate is set by large commercial banks in competition with one another.
Reference: 14.2.1.2 in the License Exam Manual
Which economic theory states that a reduced tax rate will result in a healthy economy that will in turn generate more taxes?
The Supply Side Economic Theory
The Supply Side Economic Theory (Reaganomics) is that reduced tax rates will result in a healthier economy, which will generate more taxes to compensate for the reduced rates.
Investments that move in the opposite direction of the economic cycles are known to be counter cyclical. Historically investments that fit into this category are
Precious metals such as gold
Which of the following would be considered in the fundamental analysis of a security?
III.Liquidity ratios
IV.Historical earnings trends
Fundamental analysts are concerned with information relating to the economy, industries, and individual companies. A company’s liquidity ratios and past earning trends fall within these areas of concern. Concerns about the stock price and volume of trading would be of primary interest to a technical analyst.
