Investing
Which column in the newspaper stock table will tell you the price a share of stock in Ford Motor Company was selling for when the trading day ended?
Close
"Single product" companies are considered the least risky companies in which to invest.
False
A company's annual report is primarily a public relations tool and offers very little investor information.
False
Although they are high risk, companies with no earnings can still be analyzed using the SSG.
False
As a rule, upside/downside ratios of 5 to 1 or higher are unreasonable, indicating your judgment is flawed.
False
Because the calculation of percent earned on equity may vary slightly among investment reporting services, you should mix and match data from different sources on your SSG.
False
Beginning investors should set up margin accounts with their brokerage firms, rather than cash accounts.
False
Current liabilities include debts or claims due within six months.
False
Diversification will increase the earnings potential of your mutual fund portfolio.
False
Generally, the further back in history you go, the more relevant the data points for a company become.
False
If a business has a past record of revenue and earnings growth, investors can be guaranteed future growth as well.
False
If a company pays no dividend, your annual total return will be zero.
False
If a plan is systematic, that means it may be adapted to gradual changes in your goal.
False
If you are torn between more than one career path, you would be wise to select the one that will allow you to make the most money.
False
If you are truly a long-term investor, you should constantly buy and sell stocks in response to changing stock prices.
False
In recent years, more than 90% of professionally managed mutual funds have outperformed the S&P 500 index.
False
In today's job market, your long-term financial security resides primarily in the ability of your employers' pension managers.
False
It is good business practice for public companies to send out annual reports to their shareholders, but they are not required to do so.
False
It is impossible to convert the figure for the simple average annual total return to a compound rate of return.
False
Like stocks, most mutual fund prices are determined by what people are willing to pay for them at a given time.
False
Money market mutual funds provide the greatest growth potential and carry the greatest risk.
False
Municipal bonds make the most sense for the young investor in a low tax bracket, who wants to invest for the first time.
False
Net income is often called the top line of the income statement.
False
Newer, smaller companies tend to pay higher dividends to investors than mature companies, in order to attract investors.
False
Normally, trend lines are used as projection lines on the SSG graph.
False
One disadvantage of large sales volume companies is that they are often family controlled and lack management depth.
False
People who rent do not need to purchase any kind of insurance for their personal property; that is included in the price of the rent.
False
Stockholders receive a fixed rate of interest from the businesses in which they invest.
False
The "heart" of an annual report is the Operational Overview section.
False
The amount you must pay on your medical bills each year before your health insurance goes into effect is called the co-pay.
False
The best way to begin a career plan is to let your school direct you into an academic or vocational program based on your academic record.
False
The earnings per share growth rate of a larger company is usually much greater than that of a small company.
False
The first step in creating a budget is to estimate your weekly income and expenses
False
The six-step planning process works much better for short-term goals than for long-term, life goals
False
Total assets are the sum of a company's current assets and fixed assets.
False
Value Line is the best source investors can use to find pre-tax profits for companies in which they are interested.
False
When possible, it is best to plot sales and earnings on the SSG graph in the same cycle.
False
When you are transferring data to the SSG, it is a good idea to use multiple investment information sources in order to get the most accurate picture possible.
False
When you find an outlier on the SSG graph, you should immediately eliminate the stock for that company as a potential purchase.
False
When you purchase a house, the amount of money you pay yourself is called the closing cost; the rest of the money is loaned to you.
False
You should never drop outliers from your analysis of investment data.
False
Your gross salary is the amount of income you actually have to live on.
False
Which of the follwoing correctly states the tax liability of investment income?
It is subject to federal, state and local income taxes at the same rate as other income.
Briefly explain the importance of diversification in investing?
It reduces risk by tying investments to number of different size companies and industries so that if one goes down, you wont lose as much
name two ways the equity in your home can increase.
Mortgage payment on a house, value of the property increases.
Name the two factors that determine the size of an insurance premium.
Potential size of loss, level of risk of such loss
Which of the following is NOT one of BetterInvestings four basic investment principles?
Reinvest 50% of all dividends, interest, and capital gains you earn on your investments
Which section of the SSG contains a graph for charting sales, earnings per share, and price?
Section 1
How often can the average American worker expect to change jobs today? What are the implications of this on one's career strategy?
Six or more times. Suggest a strategy that targets broad career field and multiple areas of interest rather than a specific job.
The "granddaddy" of all business newspapers is
The Wall Street Journal
Which of the following is an advantage of a large sales volume company?
The stock price tends to be more stable
Which type of mutual fund would be most likely to invest in small companies with high growth potential?
aggressive growth funds
Suppose you wanted to invest in a mutual fund that included both stocks and bonds. Which categorize of mutual fund would probably be the best choice?
balanced fund
A mortgage that must be paid off in full at the end of the loan term is called a
balloon mortgage
Financial planning begins with a
career strategy
This section of an annual report is typically no more than a paragraph or so that describes the company's business and what i makes or sells
corporate profile
Business owners are NOT personally liable for their company's losses if the business is organized as a...
corporation
As an investor, you have two basic ways to make money from investing in stocks. What are they?
dividends and capital gains
If you formulate a long range plan to reach a goal you will
find that you have more options, not fewer.
There is a strong probability that growth will continue into the future if a company's managers have produces consistent growth
for the past five to ten years
This remains after cost of goods sold is subtracted from company revenues
gross profit
Which of the following is NOT considered an "investment leak"?
gross salary
The SSG was designed primarily for
growth stocks and long-term investors
What is the Rule of 72
if an asset grows x% a year, its value will double in 72 divided by x% = y years
The rule of 72 says that
if an asset grows x% annually, its value will double in 72/x years
All of the following are sources of financial information an investor can legally use EXCEPT
information that exists inside a corporation but has not yet been released to the public
Which of the following is NOT one of BetterInvestings basic rules for investors?
invest only at times when stock prices are low
Name two important benefits of investing regularly over time
it provides a way to form investment habit and build protfolio allows you to dollar cost average meaning investing equal amounts at regular intervals
In today's job market
jobs are less stable and secure than they used to be
Suppose you are earning 3% interest on your savings account, and the inflation rate is 5%. In this case, you are
losing money
A loan a bank makes to a person buying real estate is called a
mortgage
Which of the following is NOT shown on the Value Line and Standard & Poor's stock reports
names of the people who sit on the board of directors
Which of the following would NOT be considered a form of investing?
opening an interest bearing savings account
A business would be considered a large company if it has annual sales of
over $5 billion
In the General Information section of the SSG, the box entitled "%Insiders" refers to the percentage of common stock
owned by officers and directors of the company
The amount a policyholder pays to purchase insurance coverage is called the
premium
This type of auto insurance pays for damage you may cause to another person's property, but does NOT pay for damage to your own car
property damage liability coverage
If auditors find problems in a company's accounting practices, they issue a _______ opinion about the company's financial records.
qualified opinion
Which of the following would NOT generally be considered part of selling, general, and administrative expenses?
raw materials
Which employee quality is best defined as "the ability to work well without supervision"?
responsibility
Which of the following investment options offers the lowest risk and lowest potential return
series EE bonds
High school students with part time jobs
should place the most emphasis on gaining career experience - rather than income - in their jobs.
The simplest and least expensive form of life insurance is
term insurance
Which federal agency is considered the "policeman" of the "stocks and bonds" industry?
the Securities and Exchange Commission
Each Morningstar Mutual Funds Issue lists all of the Morningstar fund categories. Adot located next to a cetegory indicated that
the category is covered in that issue
A company's board of directors is chosen by
the company shareholders
The BetterInvesting Equity Mutual Fund Check List can provide you information on all of the following categories EXCEPT
the likelihood that you will make a profit, expressed in percentages
A high P/E ratio for a mutual fund generally represents all of the following EXCEPT
the market has a less confidence that the company's earnings will increase
All of the following are reasons why mutual funds are so popular EXCEPT
they are federally insured against loss
It is a good idea for beginner investors to limit their choice of growth funds to
those that have strong performance comparable to the S&P 500 index in the 3-year, 5-year, and longer periods
Which of the following correctly calculated NAV?
value of portfolio minus liabilities divided by number of shares
Which of the following is a flexible expense?
your grocery bill
Describe three situations in which using credit is probably an acceptable choice. Why should you limit your use of credit to these situations?
1. Major purchases such as a house, car, or college tuition 2. An unanticipated emergency or life enriching opportunity 3. Purchases where retailer offers interest rate lower than on savings of investments Credit Card debt due to putting off payments builds quickly and you are sinking deeper and deeper into debt
You should probably avoid mutual funds with expense ratios higher than
1.5%
The SSG contains ____ pages to be filled out by potential investors
4
A 403(b) retirement plan is similar to a 401(k) retirement plan EXCEPT
403(b) plans are for employees of non-profit organizations.
It is possible for two different investors to use the same historical data on a company and come to different conclusions about that company and its stock.
True
It is possible to eliminate some companies from investment consideration before getting to the SSG analysis stage, simply by examining the trends in sales and earnings per share.
True
Many experienced investors select future low prices that are at least 20-25% below the current stock price.
True
More cautious investors would be wise to choose stocks where some of the total annual return is from dividends.
True
One of the best things about pursuing a dream is that it can open opportunities you never originally imagine
True
One of the best ways to come up with investment ideas is simply to look around and notice which products people are using and which businesses people are patronizing.
True
Operating expenses have a dramatic impact on the long-term performance of a fund.
True
People sometimes purchase annuity contracts and certain types of life insurance contracts to generate retirement income.
True
Percent earned on equity is calculated by dividing earnings per share by book value per share times 100.
True
Present yield does not reflect future dividend increases or decreases.
True
Reductions in workforce size or increasing profit margins would most likely result in a company's earnings growing faster than sales.
True
Regular investors are typically able to purchase most of their shares when the price is lower than average.
True
Shares in private corporations are not sold on stock markets and can only be purchased from current stockholders.
True
Some companies pay an annual dividend rather than quarterly dividends.
True
Stock price increases are based on previous increases.
True
The BetterInvesting stock evaluation software programs can help you save time in completing the SSG.
True
The ability to do without can help you meet your financial goals.
True
The calculation you make in SSG Section 5 must be at least 20% for you to double your investment in five years.
True
The fastest-growing group of workers in America is people who are working out of their homes.
True
The growth stage of a company can be perceived by examining management's dividend policy.
True
The income paid to a stockholder is called a dividend.
True
The last step in completing the SSG is Section 5, "Annual Potential."
True
The longer you hold an investment in a quality growth company, the better your chances of making money.
True
The purpose of the visual analysis section on the SSG is to get a feel for how a company has performed over an extended period of time.
True
Today's job market is very different than the one your parents faced when they were your age.
True
When estimating a company's future growth rates, remember that the most recent five-year figures are much more important than the earlier five-year figures.
True
You should generally not project that earnings per share will grow at a faster rate than past sale
True
You should not sell a stock just because you have a "paper loss."
True
f you make your own investment decisions and purchase primarily no-load funds, you will have more money to invest.
True
which of the following types of college financial aid requires the student to be employed on campus for a certain number of hours each week?
Work Aid
Samantha owns shares in a mutual fund and wants to know the fund's total return since january 1. Under which column in her newspaper's mutual fund table will she find this information?
YTD %ret
A stock is generally considered a wise investment if it has an upside/downside ratio of at least 3 to 1.
True
Although financial planners suggest keeping an emergency fund of six month's salary in a liquid account such as checking or savings, three to four months of income is more realistic for families with steady incomes.
True
As a rule, smaller and newer firms are traded on OTC markets.
True
As companies become larger, it becomes more and more difficult to maintain very rapid growth rates
True
At first, almost all of your monthly house payment goes toward paying off the interest on the loan; very little is actually applied to the debt itself.
True
Debt percentage is the ratio of debt to total capitalization.
True
Earnings on your investments should be reinvested in the stocks that produced the earnings or in other common stocks.
True
Expenses are the amounts a business pays to operate the business and earn revenue.
True
Growth and income mutual funds are likely to have a mixed portfolio of stocks and bonds.
True
Growth is the principal determinant of stock price increases.
True
If a stock's price/earnings ratio is 14, that means investors are paying $14 for $1 worth of earnings.
True
If your property insurance pays you market value for your loss, it pays you the amount the item is worth now.
True
In general, buying stocks is riskier than an investment that pays a guaranteed rate of interest, but the potential to make money is greater.
True
In mutual funds, there has never been a proven relationship between high expenses and high returns.
True
In your budget, you should treat saving and investing as a normal expense, not something to do if there is any money left over after you pay your bills.
True
Initial investors should probably use the SSG only for stocks that are covered in the Value Line Reports or Standard & Poor's Stock Reports.
True
Institutional investors buy and sell based on quarterly expectations for a company.
True
Interest you pay on your mortgage may be deducted from your gross income in determining your income tax.
True
Investors in a 401(k) plan can typically choose from a variety of funds, such as a growth stock fund or balanced fund.
True
It is not unusual for a mutual fund to hold stocks in over a hundred different companies.
True