#1
Which of the following is NOT a basic financial statement?
Profit statement
ExplanationIt's not a standard financial statement like the income statement, balance sheet, or cash flow statement.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationIt measures the profitability of an investment relative to its cost.
#3
What is the primary function of a stock exchange?
To facilitate the buying and selling of securities
ExplanationIt provides a platform for investors to trade financial instruments.
#4
What does the term 'bull market' refer to in stock trading?
A market with rising prices
ExplanationIt signifies optimism and investor confidence driving upward price trends.
#5
What is the purpose of a stock split?
To adjust the price per share by increasing the number of shares outstanding
ExplanationIt divides existing shares into multiple shares to lower the share price.
#6
What does the term 'dividend yield' indicate?
The ratio of dividends paid to the current stock price
ExplanationIt measures the dividend income relative to the current market price.
#7
What is diversification in stock investment?
Investing in multiple stocks within the same industry
ExplanationIt reduces risk by spreading investments across various assets.
#8
What is a 'blue-chip' stock?
A stock of a financially stable, well-established company
ExplanationIt represents a stable investment with a history of reliable performance.
#9
What is the significance of the Federal Reserve in the U.S. financial system?
It sets interest rates and monetary policies
ExplanationIt controls the nation's monetary policy and regulates the banking system.
#10
What is the purpose of a stock dividend?
To increase the number of outstanding shares
ExplanationIt distributes additional shares to existing shareholders.
#11
What is a 'blue-sky law' in finance?
A law that regulates the sale of securities to protect investors from fraud
ExplanationIt ensures the proper registration and disclosure of securities offerings.
#12
What is the primary goal of fundamental analysis in stock investment?
To evaluate a company's financial health and performance
ExplanationIt assesses intrinsic value based on company fundamentals like earnings and growth.
#13
What does P/E ratio stand for in stock analysis?
Price/Earnings ratio
ExplanationIt measures a company's current share price relative to its per-share earnings.
#14
What does the term 'short selling' mean in stock trading?
Selling stocks without owning them in anticipation of buying them back at a lower price
ExplanationIt's a strategy to profit from a decline in a stock's price by borrowing shares to sell.
#15
What is the significance of the Securities and Exchange Commission (SEC) in the U.S.?
To protect investors and maintain fair and orderly markets
ExplanationIt oversees securities transactions and ensures transparency and fairness.
#16
What is the 'efficient market hypothesis' in finance?
The belief that markets are always efficient and accurately reflect all available information
ExplanationIt suggests that it's impossible to consistently outperform the market.
#17
What is the purpose of a stock option?
To give the holder the right to buy or sell a stock at a specific price within a specified period
ExplanationIt provides the opportunity to buy or sell a stock at a predetermined price.