Chapter 12: Quiz
Equity financing is money received from the sale of: Bonds. Common stock. Dividends. A savings account. A proxy.
Common Stock
A distribution of money, stock, or other property that is paid to the stockholders of a company is called a: Bond. Common stock. Dividend. Savings account. Proxy.
Dividend
This calculation uses the current price per share and the annual amount of money paid to investors from the company. Book value Dividend yield Earnings per share Market value Price-earnings ratio
Dividend yield
A bargain exists when a stock's share price is greater than its book value. True False
False
Any company's stock can be listed on the NYSE. True False
False
Generally, the commission paid for a stock sale will be lower with a full-service broker than for an online brokerage firm. True False
False
Glen bought XYZ stock on November 8, 2018, at a price of $39.20 and then sold it on March 19, 2020, at $11.20. Glen can be classified as a speculator. True False
False
If Jodi owns 200 shares of stock, a 2-for-1 stock split will double the value of her holdings. True False
False
Long-term investing techniques are generally more risky than short-term investing techniques. True False
False
Many financial experts believe that a corporation's ability or inability to generate dividends in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock. True False
False
Sandy has invested in a stock. She is assured of receiving a dividend. True False
False
Stocks are guaranteed to have large returns. True False
False
Which of the following statements about stock splits is correct? If a company has a 2-for-1 split, the price will be doubled. If a company has a 3-for-1 split, the price will increase by a factor of 3. If a company has a 4-for-1 split, the new number of shares outstanding will be four times as many as before the split. If a company has a 5-for-1 split, the new number of shares outstanding will be equal to the old number of shares divided by 5. None of these is correct.
If a company has a 4-for-1 split, the new number of shares outstanding will be four times as many as before the split.
This measure uses the market price per share of the stock and the earning per share. Book value per share Earnings per share Capital gains Net income Price-earnings ratio
Price-earnings ratio
If you want to compare two companies, you should use: Book value per share. Dividend yield. Price per share. Net income. Price-earnings ratio.
Price-earnings ratio.
Which of the following usually offers some free information and charges for the more detailed online information you may need to evaluate a stock investment? Financial websites such as www.finance.yahoo.com Personal finance websites such as www.smartmoney.com Professional advisory services such as Standard & Poor's Financial Services Search engines such as Yahoo! The Securities and Exchange Commission website
Professional advisory services such as Standard & Poor's Financial Services
Which of the following is correct? The ability to generate earnings is a minor factor in determining the value of a stock. Corporate earnings are reported in the proxy statement. Earnings per share uses the price of the stock in the calculation. The price/earnings ratio should not be used to evaluate stock investments. The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.
The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.
Why does a company split its stock? The stock is trading at a low price, and the company wants to increase its stock value. It wants fewer shares outstanding. The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range. It wants the total market capitalization to be lower than the current level. The company wants to guarantee that the stock price will increase.
The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range.
A.J. wants to buy a stock at its current market price. He should use a market order. True False
True
An example of dollar cost averaging is an employee purchasing shares of his or her company's stock through a payroll deduction plan or as part of a retirement plan. True False
True
Before investing in a company's stock, an investor should evaluate the industry in which the company operates. True False
True
Earnings per share equals the corporation's earnings divided by the number of outstanding shares of a firm's common stock. True False
True
Gloria bought ABC stock on March 4, 2020, at a price of $5.87 and then quickly sold it on March 19, 2020, at $11.20. Gloria is classified as a speculator. True False
True
If you sold 100 shares of ABCD stock for $40 a share that you originally purchased for $33 a share, then your capital gain would be $700. True False
True
The Yahoo! Finance website provides specific information about a particular company, including quotes and charts. True False
True
The book value of a stock is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock. True False
True
When companies experience a bad year regarding earnings, they may choose to reduce or omit their dividend payments. True False
True
A stock issued by a stable corporation that generally attracts conservative investors is called a(n) _______ stock. blue chip income micro-cap mid-cap penny
blue chip
An investment that pays higher-than-average dividends is called a(n) _______ stock. blue chip income micro-cap mid-cap penny
income
A stock that typically sells for less than $5 per share (or in some cases, less than $1 per share) is called a(n) _______ stock. blue chip income micro-cap mid-cap penny
penny
