Foundation
What are the 5 steps to financial freedom?
Earn Money, Save Money, Develop a Financial Plan, Invest Early (Compounding), Avoid Common Mistakes
(ESPIA)
What are economic moats? Name two types.
Competitive advantages that protect a company from competitors.
Examples: Intangible assets, network effects, switching costs, cost advantage.
What are the three major financial statements?
Income Statement, Balance Sheet, Cash Flow Statement.
What does a candlestick represent on a stock chart?
The open price, close price, high price, and low price of a stock during a specific time period.
What is a catalyst?
A specific event that increases investor demand and causes the stock to re-rate.
What is compound interest and why is it powerful?
Interest earned on both principal and previously earned interest. It grows exponentially over time.
What is the purpose of Porter’s Five Forces?
To evaluate industry structure and competitive pressure affecting profitability.
What is the difference between revenue and net income?
Revenue is total sales.
Net income is profit after all expenses.
What does a moving average help investors identify?
The overall trend of a stock by smoothing out short-term price fluctuations.
If a judge asks, “What would break your thesis?” what are they testing?
Whether you understand risk and can identify critical assumptions.
What is the difference between saving and investing?
Saving protects money (low risk, low return).
Investing grows money (higher risk, higher potential return).
Explain why a company with a wide moat can justify a higher valuation multiple.
Wide moats imply durable competitive advantages, stronger long-term profitability, and lower risk — which justify premium valuation.
What is the core idea of Discounted Cash Flow?
A company is worth the present value of its future cash flows.
Why is trading volume important in technical analysis?
Volume confirms the strength of a price move. Higher volume often indicates stronger conviction from buyers or sellers.
If your stock drops 20% tomorrow but fundamentals remain intact, should you change your recommendation? Why or why not?
No. Price movement does not equal fundamental deterioration. Intrinsic value is based on business performance, not short-term volatility.
Name three common financial mistakes young investors should avoid.
Spending more than you earn, Going into unnecessary debt, Falling for scams, Gambling, Trying to cheat, Being too cautious
A company’s revenue is growing quickly, but its operating margin is declining every year. What concern should an investor have?
The company may be sacrificing profitability for growth, which could weaken long-term earnings and valuation if margins do not improve.
What is terminal value and why is it important?
It estimates value beyond the projection period and often represents a large portion of total valuation.
What are support and resistance levels?
Support is a price level where buying pressure tends to stop a decline.
Resistance is a price level where selling pressure tends to stop a price increase.
Why do traders draw trendlines?
To identify the direction of price movement and potential support or resistance areas.
Explain how human capital becomes financial capital.
You earn income using your skills (human capital), save a portion, and invest it to generate financial returns (financial capital).
You find a company with strong revenue growth, high margins, and a clear competitive moat. However, its stock price has not increased much. What are two possible reasons the market might still undervalue the company?
Investors may believe the growth is temporary or cyclical, The company may be small or under-covered by analysts, There may be perceived risks not yet resolved, The market may not fully understand the business model yet.
Why must valuation assumptions be conservative?
Because small changes in growth or margins can dramatically change intrinsic value; judges reward discipline, not optimism.
What is a bullish engulfing pattern?
A candlestick pattern where a large green candle completely covers the previous red candle, suggesting a potential reversal upward.
What does the acronym CANSLIM represent in stock investing?
A growth investing strategy developed by William O’Neil. C – Current quarterly earnings, A – Annual earnings growth, N – New product, service, or management, S – Supply and demand (shares outstanding, volume), L – Leader or laggard (industry leadership), I – Institutional sponsorship, M – Market direction