#1
What does ROI stand for in finance?
Return on Investment
ExplanationMeasure of profitability relative to the cost of investment
#2
What is the purpose of diversification in investment?
To reduce risk by spreading investments across different assets
ExplanationRisk mitigation strategy through investment variety
#3
What is the purpose of a balance sheet?
To show a company's financial position at a specific point in time
ExplanationSnapshot of a company's assets, liabilities, and equity
#4
What does the term 'Liquidity' refer to in finance?
The ability to buy and sell assets quickly without causing a significant change in their price
ExplanationEase of converting assets into cash without affecting value
#5
What is the purpose of the P/E ratio in stock analysis?
To evaluate a company's profitability relative to its stock price
ExplanationAssessment of stock's price compared to earnings per share
#6
What does GDP stand for?
Gross Domestic Product
ExplanationTotal value of goods and services produced within a country
#7
What is the formula for calculating compound interest?
P × (1 + r)^t
ExplanationCalculation of interest on principal and accumulated interest
#8
What is the purpose of a stock dividend?
To increase the number of outstanding shares without affecting the company's total market capitalization
ExplanationDistribution of additional shares to existing shareholders
#9
What is the concept of 'Present Value'?
The value of future cash flows discounted back to the present time
ExplanationAssessment of the current worth of future cash flows
#10
What does the term 'Fiscal Policy' refer to?
Government policy related to taxation and spending
ExplanationGovernment decisions on tax rates and public spending
#11
What does the term 'Blue Chip Stocks' refer to?
Stocks of well-established companies with a history of stable earnings
ExplanationShares from financially sound, reputable companies
#12
What is the role of the Federal Reserve in the United States?
To manage monetary policy and regulate banks
ExplanationControl of the nation's money supply and interest rates
#13
What does the term 'Derivative' mean in finance?
A financial contract whose value is derived from the value of an underlying asset
ExplanationFinancial instrument whose value is based on another asset
#14
What is the purpose of the 'Debt-to-Equity Ratio'?
To evaluate a company's ability to pay off its debts with its equity
ExplanationAssessment of company's leverage and financial risk
#15
What is the purpose of 'Technical Analysis' in trading?
To forecast future price movements based on historical market data
ExplanationAnalysis of past market data to predict future price movements