Fundamentals of Finance Quiz

ROI is a measure of the profitability of an investment, calculated as the ratio of the net gain from the investment to the initial cost.

The Current Ratio assesses a company's ability to cover short-term liabilities with its short-term assets.

The Income Statement details a company's revenues, expenses, and profits or losses over a specified period, providing a snapshot of its financial performance.

Financial ratio analysis involves evaluating key ratios to gain insights into a company's financial condition, performance, and potential risks.

Working Capital reflects a company's operational liquidity, calculated as the difference between current assets and current liabilities.

PV represents the present value, FV is the future value, r is the discount rate, and n is the number of periods.

Diversification involves spreading investments across different assets to minimize the impact of a poor-performing investment on the overall portfolio.

Blue Chip Stocks represent shares in financially stable, reputable companies known for consistent earnings and reliability.

Financial leverage involves using borrowed capital to amplify potential returns, though it also increases the risk.

The Debt-to-Equity Ratio assesses a company's financial leverage by comparing its debt to shareholders' equity.

Net Profit Margin is a profitability ratio, calculated as net profit divided by total revenue, indicating the percentage of profit relative to sales.

EMH proposes that stock prices incorporate and reflect all relevant information, making it impossible to consistently achieve above-average returns through analysis.

Standard Deviation gauges the extent of fluctuation or dispersion in a set of values, indicating the volatility of a stock's returns.

Alpha measures an investment's excess return compared to the expected return based on market performance.

Beta quantifies a stock's volatility in relation to the market, indicating its sensitivity to market movements.