Unit 14 Quiz

A corporation has a net income of $5.2 million after taxes. If 4 million shares of common stock are outstanding, the earnings per share is: A) $1.30. B) $0.80. C) $1.78. D) $5.20.

A) $1.30.

SSS Corporation's total assets amount to $780,000 of which $260,000 represents current assets. Total liabilities equal $370,000, of which $200,000 is considered long-term or other liabilities. What is SSS Corporation's shareholders' equity? A) $410,000. B) $1,150,000. C) $980,000. D) $170,000.

A) $410,000. Total assets minus total liabilities equals shareholders' equity ($780,000 - $370,000 = $410,000).

Which of the following tools is most often used by the Federal Reserve Board to control the money supply? A) Altering the reserve requirements. B) Engaging in open market operations. C) Lowering the discount rate. D) Changing margin requirements.

B) Engaging in open market operations.

Statistics from which of the following industries are considered a leading indicator of economic growth? A) Natural gas. B) New housing. C) High technology. D) Automotive.

B) New housing.

The Federal Reserve Board can manage the money supply with all the following tools EXCEPT: A) open market operations. B) income tax rate. C) discount rate. D) bank reserve requirements.

B) income tax rate.

In its efforts to control the money supply, the Board of Governors of the Federal Reserve System has a number of tools at its disposal. The one used most frequently is: A) changing the reserve requirements. B) open market transactions by the FOMC. C) adjusting margin requirements. D) changing the discount rate.

B) open market transactions by the FOMC.

A technical analyst would be most interested in which of the following? A) Working capital. B) PE ratios. C) 200-day moving averages. D) Quick ratios.

C) 200-day moving averages.

Financial footnotes found in which of the following would be of the greatest importance to your broker/dealer's retail customers? I. The BD's principal approved advertising II. Balance sheets of stocks you've recommended to them III. Income statements of stocks you've recommended to them IV. Your BD's Website page showing the history of the firm

II and III

Which of the following balance sheet entries may be affected when a company pays a cash dividend? I. Shareholders' equity. II. Total assets. III. Total liabilities. IV. Working capital.

II and III

A customer buys XYZ stock at $60 per share. The stock is currently trading at a 10:1 price-to-earnings (PE) ratio. The firm declares a 3:1 stock split. What will the PE ratio be after the split if earnings remain unchanged? A) 10:1. B) 5:1. C) 12:1. D) 3:1.

A) 10:1.

A recession is defined as a drop in GDP for: A) 2 consecutive quarters. B) 4 consecutive quarters. C) 3 consecutive quarters. D) 6 consecutive quarters.

A) 2 consecutive quarters.

The investment theory that assumes the market adjusts automatically as new information becomes known or relevant about a particular security, thereby resulting in a fair market price at all times, is known as: A) Efficient market theory. B) Odd-lot theory. C) Dow theory. D) Supply side economics.

A) Efficient market theory.

Which of the following stocks is regarded as a defensive stock? A) Electric utility stock. B) Stock with a strong cash position and a low ratio of debt. C) Stock selling close to its support level. D) Aerospace stock.

A) Electric utility stock.

Which of the following characteristics best exemplifies a value stock? A) Low price-to-book, low price-to-earnings ratio. B) Low earnings per share growth, high profitability. C) High earnings per share growth, high profitability. D) Low price-to-book, high price-to-earnings ratio.

A) Low price-to-book, low price-to-earnings ratio.

Which of the following most quickly reflects changes in FRB policy? A) The prime rate. B) The discount rate. C) The call money rate. D) The CD rate.

B) The discount rate.

All of the following will affect the working capital of a corporation EXCEPT: A) declaration of a cash dividend. B) payment of a cash dividend. C) a decrease in liabilities. D) an increase in assets.

B) payment of a cash dividend.

The economic philosophy that believes in controlling the money supply to stimulate economic growth is often referred to as: A) the Fiscal Economic Theory. B) the Monetarist Economic Theory. C) the Supply Side Economic Theory. D) the Demand Side Economic Theory.

B) the Monetarist Economic Theory.

A highly leveraged company has the smallest percentage of its total capitalization in: A) long-term debt. B) short-term debt. C) common stock. D) preferred stock.

C) common stock

The immediate effect of the Federal Reserve's buying and selling of securities in the marketplace is to: A) check inflation. B) set reserve requirements for Fed. member banks. C) make credit more or less available. D) stop a recession.

C) make credit more or less available.

All of the following are functions of the Federal Reserve EXCEPT: A) setting reserve requirements for banks. B) setting the discount rate. C) setting initial margin requirements on exempt securities. D) acting as fiscal agent for the U.S. Treasury.

C) setting initial margin requirements on exempt securities.

Buying stocks with high PE ratios normally reflects which of the following investment styles? A) Value. B) Special situations. C) Turnaround. D) Growth.

D) Growth.

If a chart indicates that both the DJIA and the advance/decline line have been increasing since January, and the advance/decline line continues to rise, the market should: A) not change. B) turn down sharply. C) turn down moderately. D) continue to rise.

D) continue to rise.

If the FOMC sells government securities in the open market, it will: A) not change the money supply. B) increase the money supply. C) none of these. D) decrease the money supply.

D) decrease the money supply.

You note that "help wanted" advertisements in "The Wall Street Journal" have been increasing. This economic measure is a: A) none of these. B) lagging indicator. C) coincident indicator. D) leading indicator.

D) leading indicator.

A report by the federal government stating the Consumer Price Index (CPI) has increased by .3% indicates: A) consumers purchased .3% more goods that month. B) consumers purchased .3% more higher-priced products than lower-priced products. C) the economy experienced deflation. D) the cost of goods purchased by consumers increased, on average, .3% for the month.

D) the cost of goods purchased by consumers increased, on average, .3% for the month.

If the U.S. dollar has fallen relative to foreign currencies, which of the following statements are TRUE? I. U.S. exports are likely to rise. II. U.S. exports are likely to fall. III. Foreign currencies buy fewer U.S. dollars. IV. Foreign currencies buy more U.S. dollars.

I and IV

Which index represents the thinnest selection of stocks? A) Value Line Index B) S&P 500 C) Wilshire D) Dow Jones Industrial Average

D) Dow Jones Industrial Average

A head and shoulders bottom formation is an indication of: A) a bearish market. B) a bullish market. C) the reversal of an upward trend. D) the reversal of a downtrend.

D) the reversal of a downtrend.

Which items would change if a company buys equipment for cash? I. The working capital. II. The total assets. III. The total liabilities. IV. The shareholders' equity.

I only

A tool that is NOT used by the FRB to control the money supply is: A) the prime rate. B) the FOMC. C) the discount rate. D) the required reserve rate.

A) the prime rate.

Analysts who are most interested in confirming a market trend would use: A) technical analysis. B) random walk theory. C) fundamental analysis. D) confidence theory.

A) technical analysis.

If a registered representative were explaining the characteristics of different stocks and industries to a customer, it would be CORRECT to say that: I. automobile stocks are cyclical. II. pharmaceutical stocks are cyclical. III. companies producing appliances are defensive. IV. the tobacco industry is defensive.

I and IV

A company's changing from straight line to accelerated depreciation will: I. increase income in the early years. II. decrease income in the early years. III. increase income in the later years. IV. decrease income in the later years.

II and III

If the rate of inflation has slowed down and the Federal Reserve Board (FRB) takes action to spur the economy forward, which of the following statements regarding outstanding fixed-income securities trading in the secondary market as a result of the FRB action is TRUE? A) Their prices will rise. B) Their maturities will be extended. C) Their coupon rates will rise. D) Their yields will rise.

A) Their prices will rise.

Working capital is: A) current assets - current liabilities. B) only the cash and equivalents. C) total assets - total liabilities. D) current assets - inventory.

A) current assets - current liabilities.

All of the following ratios are measures of the liquidity of a corporation EXCEPT: A) debt/equity ratio. B) acid-test ratio. C) quick ratio. D) current ratio.

A) debt/equity ratio.

The largest component of the S&P 500 index is made up of A) industrial stocks. B) financial stocks. C) small-cap stocks. D) technology stocks.

A) industrial stocks.

All of the following are true of stockholders' equity EXCEPT: A) that it is carried as an asset on the balance sheet. B) that it consists of stock issued, capital surplus, and retained earnings. C) that it is also called net worth. D) that it is reflected in the book value of the stock.

A) that it is carried as an asset on the balance sheet.

The term "disintermediation" refers to: A) the flow of money from money market instruments into traditional savings vehicles. B) protecting a diversified portfolio through the purchase of index put options. C)using margin to leverage one's returns. D) the flow of money from traditional, low-yielding savings accounts to higher- yielding money market instruments.

D) the flow of money from traditional, low-yielding savings accounts to higher- yielding money market

KPT, Inc. is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income? I. Tax rate. II. Cash dividend. III. Allowance for bad debts. IV. Retained earnings.

I and III