Financial Literacy and Investment Basics Quiz

Net income is the total earnings of a company after deducting all expenses and taxes.

ROI is a financial metric that calculates the return generated on an investment relative to its cost.

CDs are savings instruments, not investment accounts, offering fixed interest rates for a specified term.

Diversification involves investing in different assets to minimize the impact of poor performance in any single investment.

A bull market is characterized by sustained upward trends in stock prices across various sectors.

Diversification involves spreading investments across various assets to reduce the impact of a poor-performing asset on the overall portfolio.

Stocks represent ownership in a company and provide shareholders with voting rights and potential dividends.

The Price/Earnings ratio is a valuation metric that compares a company's stock price to its earnings per share.

Asset allocation involves distributing investments across different asset classes to achieve a balance between risk and return.

Liquidity measures how quickly an asset can be sold or converted to cash without significant price impact.

Stocks are considered high-risk investments due to their price volatility and market uncertainties.

A stop-loss order is a risk management tool that automatically sells a security when its price falls to a specified level.

Stocks, while high-risk, also offer the potential for significant returns through capital appreciation.

Stocks have the potential for high returns, but they also come with higher levels of risk compared to other investment options.