Ch 12 Stocks
The Value Line report contains current information about the company's net ________ and total _______ .
income, revenue
A market in which an investor purchases financial securities through an investment bank or other representative from the issuer of the securities is called a(n): Multiple choice question.
primary market
A ________ is a legal form that request that stockholders transfer their voting rights to someone within the organization who know the situations of the company better.
proxy
A legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individuals or individual is called a:
proxy
Buy and Hold
purchase stock and hold onto it for a number of years
Dollar cost averaging
purchasing an equal dollar amount of stock at equal intervals
True or False: Dollar cost averaging is a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals.
true
True or False: Net profits will be decreased by interest paid on margined stocks.
true
True or False: An account executive is also called a stockbroker.
true *Account executives or stockbrokers are licensed and buy and sell securities for clients.
Traders hold stocks
typically less than a year
A dividend yield is the annual dollar amount of income generated by an investment divided by the investment's current share ______
value
Stocks that pay a higher-than-average dividend are called
"income stocks."
You purchased Krispy Kreme stock valued at $12,000. Your full-service investment company charges $5 for commission. What is the total cost of the stock purchase? Multiple choice question.
$12,005 *$12,000 + 5 = $12,005.
Book value equals:
(Assets − Liabilities)/Number of shares outstanding.
A corporation is under: -legal obligation to buy back shares from the public. -law forced to purchase back 35 percent of the stocks sold to the public. -no legal obligation to buy back shares from the public. -law forced to purchase back 50 percent of the stocks sold to the public.
-no legal obligation to buy back shares from the public.
Type of Stock Investments 1. Blue Chip 2. Cyclical 3. Defensive 4. Growth 5. Income 6. Large Cap 7. Penny
1. A stock issued by a large, stable company; usually pays dividends. Safe investment that generally attract conservative investors. 2. A stock that follows the business cycle of advances and declines in the economy. 3. A stock that remains stable during economic decline. 4. A stock issued by a corporation that has the potential of earning profits above the average of firms in the economy. 5. Pays higher than average dividends 6. Stock issued by a corporation worth more than 10B 7. Stocks that sell for $5 or les per share
For the past 100 years the average annual return for stocks has been alomst
10 oercent
When purchasing a stock or selling stock, the brokerage firm will usually charge a minimum commission between $____ and $_____
5,25
Dividend yield equals:
Annual dividend amount/Current price per share.
Brenda purchases stock and never plans to sell them. She could be considered to be using a __
Buy-and-hold technique
Investors who earn larger returns because they borrow part of the money needed to by a particular stock are using which of the following techniques?
Buying on margin
Rebecca owns stock that pays a dividend. She does not want the cash now; instead, she would prefer to have more shares of stock. She should use a __
Dividend reinvestment plan
equity financing
Equity financing is the process of raising capital through the sale of shares. Companies raise money because they might have a short-term need to pay bills or need funds for a long-term project that promotes growth. By selling shares, a business effectively sells ownership of its company in return for cash.
Which of the following is not included in the Value Line report?
Information on the educational and work backgrounds of the analysts who cover the stock Need help? Review these concept resources.
A stock issued by a company that has a capitalization of between 50 million and 300 million or less
Micro cap
A date on which a stockholder must be registered on the corporation's books in order to receive dividend payments is called what?
Record date (AKA transfer date, par value, proxy) *PROXY:This is the definition of a record date. A proxy is the legal document that describes issues being voted on at the annual meeting and giving a designated party the right to vote the stockholder's shares.
A marketplace where member brokers who represent investors meet to buy and sell securities.
Securities Exchange
Which of the following is correct?
The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.
Current order
The request to buy or sell a stock at the current market value is called a market order.
Stop loss order:
The request to buy or sell a stock at the when the price reaches a specified point. When the price reaches that point, a stop-loss order becomes a market order.
Why does a company split its stock?
The stock is trading at a high price, and the company wants to bring the price in line with a theoreticalideal range.
Which of the following is not correct regarding preferred stock?
The yield on preferred stocks is often lower than the yield on corporate bonds.
True or False: The first step in selling short stock is to borrow the stock from your broker.
True
Which of the following is incorrect?
Very little information is available about stocks.
The opportunity, but not the obligation, to buy a security within a specified period of time at a guaranteed price is
a call option
A licensed individual who buys or sells securities for clients is oftentimes called a(n):
account executive or stockbroker.
Average returns on stocks since the end of WWII is:
almost 10%
A limit order is a request to buy or sell a stock at a specified dollar ________.
amount.
Investors hold stocks:
at-least a year
DRIP (dividend reinvestment)
automatically invest cash dividends to purchase more shares
Cliff retired 10 years ago and wants to still own a few stocks. Dividends are important to him, but so isgrowth. He is most interested in stocks that are safe investments. He should purchase _______ stocks.
blue chip
What is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock?
book value
Buying stock on margin
borrowing part of the money needed to buy a stock
Selling short is selling stock that has been borrowed from a(n) ______ firm and must be replaced at a later date.
broker
Options are the right to ____ or _____ a stock at a predetermined price during a specified period of time
buy, sell
Day Trading
buying and selling stocks in a very short period of time
The strategy of buying a stock hoping it will increase in value over time is called:
buying long.
The most obvious difference between full-service and discount firms is the they charge when you buy or sell stock and other securities.
comissions
The annual dollar amount of dividends generated by an investment divided by the stock's current market value is called:
dividend yield (AKA dividend payout, total return, price-earnings growth ratio) *Total return is the dollar amount of profit made on a share of stock. *Dividend payout ratio is the dividend divided by the net income.
An advantage of being a preferred stockholder is the ability to receive cash ______ before common stockholders.
dividends
For stockholders, ______ are typically paid on a quarterly basis if they are paid.
dividends
A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals is called:
dollar cost averaging *techniques include stop-loss orders, limit orders, market order limits
Earnings per share is equal to a corporation's divided by the number of outstanding of a firm's common stock.
earnings, shares
The Nasdaq is a(n):
electronic marketplace
Corporations do not have to repay the money obtained from ___________ financing.
equity
Beginning investors with little or no experience, individuals who are uncomfortable making investment decisions, and people who are uncomfortable trading stocks online should use a ____ brokerage.
full-service
Options trading
gives you the right to buy or sell a stock at a specific price during a specific window of time
Most companies pay dividends to:
keep investors happy. *Dividends are paid from post-tax dollars, so they do not reduce income taxes for the corporation. *Dividends are not subtracted from net income on the income statement.
Investors typically hold stocks more than a year, and traders typically hold stocks _____ than a year.
less
The book value for a share of stock is determined by deducting all __________ from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.
liabilities
A request to buy or sell a stock at a specified price is called a:
limit order
Devin wants to purchase DEF stock for a specified price of $40.00 or less, and he understands this request will be executed after all previously received orders have been fulfilled. He should use a
limit order
A speculative technique whereby an investor borrows part of the money needed to buy a particular stock is called:
margin investing.
A(n) ______ order is a request to buy or sell a stock at the current price.
market
The request to buy or sell a stock at the current market value is called a:
market order
Buying Long
means you buy a stock, plan to hold it for awhile and hope it increases in value from price appreciation and also possibly from dividend income.
Patrick graduated from college five years ago. He has set up an emergency fund and has been paying off his student loans. In addition, he participates in the retirement plan offered by his employer. He wants to invest $75 per month in very small companies (capitalization between $50 and $300 million or less). He should purchase _______ stocks.
micro-cap
information on companies' websites is likely to be:
more up-to-date than printed materials.
Interest charges on margin transactions will reduce:
net profits.
A daily source of printed material that provides useful information about stocks is a:
newspaper
Kelly bought some stock using an investment bank from the issuer of those securities. She bought her shares
on the primary market
The right to buy or sell a stock at a predetermined price during a specified period of time is called:
option
A stock that typically trades for less than $5 per share (or in some cases, less than $1 per share) and has a small amount of capitalization is called a(n) _______ stock.
penny
Which category of stockholder receives dividends first? -Multinational -Common -Dispersed -Preferred
preferred
this measures the market price per share of the stock and the earning per share
price-to-earnings ratio
A(n) _________ market is a market in which an investor purchases financial securities through an investment bank or other representative from the issuer of those securities.
primary
Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date is called:
selling short
Selling short
selling stock that you dont own with the expectation that the price will decrease
Earnings per share equals after-tax income divided by the number of _______ outstanding.
shares
A stock is an event in which the shares of stock owned by existing stockholders are divided into a larger or smaller number of shares.
split
Buying on margin is a technique whereby an investor borrows part of the money needed to buy shares of a particular ______.
stock
A procedure in which the shares of stock owned by existing stockholders are divided into a larger (or smaller) number of shares is called a:
stock split
When investing in stocks, it is important to remember that:
stocks do not always increase in value.
Jackson was interested in purchasing low-value securities that were not listed on the NYSE. Heprobably used _____ to complete his transaction.
the over-the-counter market
