Stocks

Q U E S T I O N   1 :
What is a stock?
	a)	The right to buy a portion of a company's net worth.
	b)	Ownership in a company.
	c)	The base of most New England clam chowders.
	d)	A basket of equities.
Q U E S T I O N   2 :
A stock's P/E ratio is determined by...
	a)	Multiplying a company's stock price per share by the number of estimated shares outstanding.
	b)	Dividing a company's price per share by its earnings per share.
	c)	Calculating the number of people invested in a stock per worker employed by the company.
	d)	Dividing potential for returns by estimated earnings per share.
Q U E S T I O N   3 :
In investment speak, ADR stands for what?
	a)	American depositary receipts
	b)	Anno Domini Res
	c)	Ante Donald Regan
	d)	Ample Domestic Return
Q U E S T I O N   4 :
Company A.com had no earnings and only $20 million in revenue in 1998. But it was worth $1.2 billion on the open market. Company B had earnings of $20 million and revenues of $300 million but was worth just $1 billion. How could that be?
	a)	Company A offered a free T-shirt with every 100 shares purchased.
	b)	Company A's earnings are expected to grow at an annual rate of 50% over the next five years while Company B is expected to grow at 12%.
	c)	Company A offers a dividend and a stock with dividends generally appreciates more than a stock without.
	d)	Small companies are always better investments than large companies because they are more nimble.
Q U E S T I O N   5 :
Which of the following characteristics does not generally differentiate a large-cap stock from a small-cap stock?
	a)	More steady performance, as measured by earnings, revenue and stock price.
	b)	Potential for much greater returns due to greater growth prospects and correspondingly higher volatility.
	c)	More security during times of economic trouble.
	d)	More analyst coverage on Wall Street and, therefore, more information available.
Q U E S T I O N   6 :
Investors who need a steady stream of income from their equity investments would be best served by investing in...
	a)	A small-cap stock with a high P/E.
	b)	A blue-chip stock that pays a dividend.
	c)	An ADR that is benefiting from a favorable currency exchange rate.
	d)	A stamp collection.
Q U E S T I O N   7 :
Company A reported earnings of 50 cents a share last year, a 25% increase over the previous year's results of 40 cents. Its P/E ratio, however, dropped by 10%. How is that possible?
	a)	The company executed a stock split, doubling the number of shares outstanding and halving the share price.
	b)	The stock price increased from $10 to $11.25.
	c)	The stock price declined from $10 to $8 per share.
	d)	The stock price stayed the same.
Q U E S T I O N   8 :
What is the Dow Jones Industrial Average?
	a)	The composite price of all of the stocks that trade on the major exchanges.
	b)	An absolute measure of corporate earnings and thereby an indication of market health.
	c)	A weighted price measure of stock in 30 large corporations meant to represent the U.S. economy.
	d)	U.S. GDP divided by the market capitalization of the 30 largest stocks.
Q U E S T I O N   9 :
A stock is generally considered 'cheap' when it meets which of the following criteria?
	a)	Price per share is less than $20.
	b)	The P/E ratio is small relative to that of other companies in its peer group as well as its projected growth rate.
	c)	The price has not appreciated more than 10% in any given year.
	d)	Earnings per share are low and the 'multiple' is high.