chapter 15- personal finical planning

Financial Statements. List the characteristics of a firm that investors analyze by using the balance sheet and income statement. Investors can use the __________ to analyze the​ firm's sources of funds and how it has invested those funds. The balance sheet shows the​ firm's _______________ and its __________. The _________ shows the​ firm's _____________ over a particular period of time. Investors use the income statement to determine how much income the firm generated and what expenses it incurred. ​(Select from the​ drop-down menus.)

(1) balance sheet (2)assets (3)liabilities and shareholders equity (4)income statement (5)revenues, expenses, and earnings

Stock prices tend to _________________ when inflation is expected to _____________________. ​(Select from the​ drop-down menus.)

(1)decrease (2)increase

ECNs. What are Electronic Communications Networks​ (ECNs)? How are ECNs​ used? Electronic Communication Networks​ (ECNs) are: ​(Select the best answer​ below.) A. computer systems that match up desired purchases and sales of stocks. B. federal systems of communications required to be used by all brokers. C. networks that link bankers and brokers. D. computer systems that match up desired purchases and sales of real property.

A

If the value of the stock bought on margin​ declines: ​(Select the best answer​ below.) A. the investor may get a margin call from the brokerage firm to put additional cash in his account to back the loan. B. the brokerage firm loses. C. the loss is limited to the margin paid. D. a higher return is realized since the cash investment was less than the total price of the stock.

A

Inflation is measured by​ the: ​(Select the best answer​ below.) A. consumer price index. B. calculated price index. C. consumer purchase index. D. calculated purchase index.

A

Interest Rates. How do interest rates affect economic​ growth? Why do interest rates affect some stock prices more than​ others? Which federal agency influences interest​ rates? Interest rates affect economic growth and thus​ have: ​(Select the best answer​ below.) A. an indirect impact on stock prices. B. no impact on stock prices. C. a direct impact on stock prices. D. an unpredictable impact on stock prices.

A

Round versus Odd Lot. What do the terms round lot and odd lot mean in stock​ transactions? A round lot is an order​ for: ​(Select the best answer​ below.) A. shares of stock sold in multiples of 100. B. less than 100 shares of stock. C. shares of stock from companies in different industries. D. shares of stock from several similar companies.

A

Stock prices are more sensitive in industries​ where: ​(Select the best answer​ below.) A. borrowing is used by consumers. B. brokers are heavily invested. C. there is a large volume of transactions. D. there is little need to borrow.

A

Stock exchanges​ facilitate: ​ (Select the best answer​ below.) A. purchases of futures by having investment banks available to provide financing. B. commodity purchases by having one location for bankers and borrowers. C. the trading of stocks in the secondary market by providing a physical location for trading. D. the trading of stocks in the primary market by providing a physical location for trading.

c

Floor traders:

execute trades on the floor for themselves or someone else.

To set up and use an online brokerage​ account, an investor​ would: ​(Select the best answer​ below.) A. set up the account​ online, then send a​ check, and could make trades once the check clears. B. call the brokerage firm to set up an​ account, then send a​ check, and could make trades once the check clears. C. call the brokerage firm to set up an​ account, pay with a credit​ card, and begin to make trades. D. set up the account​ online, pay with a credit​ card, and begin to make trades.

A

An annual report​ contains: ​(Select the best answer​ below.) A. firm history and management vision. B. standardized financial information that can be used to analyze a​ firm's performance. C. information on all the managers and executives. D. the names of all the employees.

B

Higher economic​ growth: ​(Select the best answer​ below.) A. decreases stock prices. B. increases stock prices. C. increases the volatility of stock prices. D. does not affect stock prices.

B

If the U.S.​ government's fiscal policy involves raising​ taxes, corporate earnings​ will: ​(Select the best answer​ below.) A. be affected in an unpredictable way. B. be negatively affected. C. be positively affected. D. not be affected.

B

Industry Analysis. Why is an industry analysis of stocks​ important? List some sources of information about firms and their industry. A​ firm's stock​ price: ​(Select the best answer​ below.) A. is set by the shareholders. B. is susceptible to industry conditions. C. increases at a fixed percent. D. fluctuates according to executive decisions.

B

Interest rates are influenced by the monetary policy of​ the: ​(Select the best answer​ below.) A. Executive Branch. B. Federal Reserve Board. C. New York Stock Exchange. D. Treasury Department.

B

Managers may be able to boost the reported earnings of their firm​ by: ​(Select the best answer​ below.) A. using forecasted information. B. using a specific accounting method. C. using old information. D. persuading accountants to report what they ask.

B

Margin sales benefit the brokerage firm​ because: ​(Select the best answer​ below.) A. the investment is less than the price of the stock. B. they earn interest. C. stock prices usually rise. D. stock prices have been relatively steady.

B

Investors who trade stock have accounts at a ____________ firm. To buy or sell a stock listed on the​ NYSE, the investor contacts the brokerage​ firm, which electronically sends the request to buy or sell to the NYSE. There a computer matches up ___________________ orders and communicates the executed order to the brokerage firm. In the traditional​ method, which is still used for some​ transactions, the brokerage firm submits a message to one of its _____________ who negotiates a price with another trader who is trying to sell or buy the stock. Once the trade is​ complete, the floor trader sends a confirmation to the​ brokerage, which forwards it to the investor.

BROKERAGE FIRM. BUY AND SELL. FLOOR TRADERS

Buying on Margin. What is buying a stock on​ margin? What may happen if the value of the stock bought on margin​ declines? What are the advantages to investors and brokerage firms when stocks are bought on​ margin? When buying a stock on​ margin, an investor borrows a portion of the funds to buy the stock​ from: ​(Select the best answer​ below.) A. the Federal Reserve. B. any willing lender. C. the brokerage firm. D. a commercial bank.

C

Economic Growth. Explain how economic growth is measured. How does economic growth affect stock​ prices? What are some popular indicators of economic​ growth? How does the​ government's fiscal policy affect economic​ growth? Economic growth is measured​ using: ​(Select the best answer​ below.) A. growth domestic product. B. gross domestic production. C. gross domestic product. D. growth domestic production.

C

Electronic Communication​ Networks: ​(Select the best answer​ below.) A. make up​ 80% of all trading of NASDAQ stocks. B. allow brokers to recoup​ fees, avoiding transaction costs. C. are used to execute some transactions on the NYSE and NYSE MKT LLC. D. can only be used while the exchange is open.

C

Investors can obtain information about firms and their corresponding industry​ from: ​(Select the best answer​ below.) A. financial web sites and bankers. B. bankers and published sources. C. financial web sites and published sources. D. financial web sites and word of mouth.

C

Misleading Information. Why may the top managers of a firm be tempted to use misleading estimates of revenues and​ expenses? How may managers be able to boost the reported earnings of their​ firm? Top managers of a firm may be tempted to use misleading estimates of revenues and expenses​ because: ​(Select the best answer​ below.) A. the stock value influences reported​ earnings, and this is a component of​ managers' evaluation and compensation. B. reported earnings influence the stock​ value, and this is a component of​ managers' evaluation and compensation. C. reported earnings influence the stock value and the firm​ value, and this is a component of​ managers' evaluation and compensation. D. the stock value influences reported earnings and the firm​ value, and this is a component of​ managers' evaluation and compensation.

C

Stock Exchanges. What are stock​ exchanges? How do they facilitate the trading of​ stocks? Stock exchanges are facilities​ that: ​ (Select the best answer​ below.) A. are used to buy and sell farm animals. B. are used to buy and sell commodities. C. allow investors to purchase or sell existing stocks. D. allow investors to purchase or sell existing mutual funds.

C

The abbreviated term that is used to identify the stock for trading purposes is called​ the: ​(Select the best answer​ below.) A. stock code. B. code name. C. ticker symbol. D. nickname.

C

Types of Orders. Discuss the difference between a market​ order, a limit​ order, and a stop order. A limit ​order: ​(Select the best answer​ below.) A. does not ensure that the stock price will not change before the order is executed. B. does not allow brokerage trades. C. will specify what portion of the desired shares you are willing to accept. D. is a special form of limit order to execute a transaction when the stock price reaches a specified level.

C

What other exchange trades stocks in a similar manner to the​ NYSE? ​(Select the best answer​ below.) A. National Stock Exchange B. North American Stock Exchange C. NYSE MKT LLC D. California Stock Exchange

C

An odd lot is an order​ for: ​(Select the best answer​ below.) A. shares of stock from several similar companies. B. shares of stock from companies in different industries. C. shares of stock sold in multiples of 100. D. less than 100 shares of stock.

D

Annual Report. Why is it necessary to analyze a​ firm? What is an annual​ report? What information does it contain to aid the​ analysis? An analysis of the firm​ is: ​(Select the best answer​ below.) A. important because there are regulations that apply to various firms. B. useful but not really important because there is little variation in management skills and firm performance. C. useful but not really important because all firms report to the Internal Revenue Service. D. important because there are variations in management skills and firm performance.

D

Economic Analysis. When performing an economic analysis of​ stocks, what economic factors are most closely​ watched? When performing an economic analysis of​ stocks, the three economic factors that are most closely watched​ are: ​(Select the best answer​ below.) A. economic​ growth, interest​ rates, and the money supply. B. economic​ growth, the money​ supply, and inflation. C. the money​ supply, interest​ rates, and inflation. D. economic​ growth, interest​ rates, and inflation.

D

Inflation. What is​ inflation? How is inflation​ measured? How does inflation affect stock​ prices? Inflation​ is: ​(Select the best answer​ below.) A. an increase in the level of stock prices over a specific period. B. a change in the level of stock prices over a specific period. C. a change in the general level of prices of products and services over a specific period. D. an increase in the general level of prices of products and services over a specific period.

D

Online Brokerage Services. What are some advantages of using online brokerage​ services? Describe how an investor would set up and use an online brokerage account. The two main advantages of using online brokerage services are​ the: ​(Select the best answer​ below.) A. wider range of stocks available and the investment advice. B. investment advice offered and the convenience. C. ability to program investment decisions and the wider range of stocks available. D. convenience and the low cost per transaction.

D

Placing Orders. What information must you provide when placing an order to buy or sell​ stock? What is a ticker​ symbol, and why is it​ important? When placing an order to buy or sell​ stock, you must​ provide: ​(Select the best answer​ below.) A. the code of the​ stock, whether the order is a primary or secondary​ order, the number of shares of​ stock, and whether it is a full order or a brokerage order. B. the code of the​ stock, whether the order is a primary or secondary​ order, the number of shares of​ stock, and whether it is a market order or a limit order. C. the name of the​ stock, whether the order is to buy or sell the​ stock, the number of shares of​ stock, and whether it is a full order or a brokerage order. D. the name of the​ stock, whether the order is to buy or sell the​ stock, the number of shares of​ stock, and whether it is a market order or a limit order.

D

Which of the following is a popular indicator of economic​ growth? ​(Select the best answer​ below.) A. new home sales B. personal income level C. the level of employment D. All of the above.

D