PORTFOLIO & MARKET ANALYSIS
Which investment objective focuses on minimizing volatility rather than maximizing return?
A. Growth
B. Speculation
C. Capital preservation
D. Aggressive growth
What is capital preservation?
This financial statement shows revenues minus expenses over a period of time.
What is the income statement?
This order guarantees execution but not price.
What is a market order?
Initial margin for equities under Regulation T is this percentage.
What is 50 percent?
This FINRA forum resolves disputes between customers and firms.
What is arbitration?
This measure shows how sensitive a portfolio is to overall market movements.
What is beta?
EPS is calculated as:
A. Net income ÷ assets
B. Net income ÷ equity
C. Net income ÷ shares outstanding
D. Assets ÷ liabilities
What is net income divided by shares outstanding?
A stop order becomes which type of order once triggered?
A. Limit
B. Market
C. Fill-or-kill
D. All-or-none
What is a market order?
Maintenance margin for long equity positions is generally:
A. 10%
B. 20%
C. 25%
D. 50%
What is 25 percent?
Suitability is primarily based on which factor?
A. Market forecasts
B. Firm profitability
C. Customer profile
D. Trading frequency
What is the customer profile?
This theory assumes prices reflect all publicly available information.
What is the Efficient Market Hypothesis?
This ratio measures short-term liquidity.
What is the current ratio?
This regulation governs short selling and locate requirements.
What is Regulation SHO?
This margin strategy involves borrowing to purchase securities.
What is buying on margin?
This FINRA rule requires firms to know the customer.
What is the Know-Your-Customer rule?
Which index is price-weighted?
A. S&P 500
B. Russell 2000
C. Nasdaq Composite
D. Dow Jones Industrial Average
What is the Dow Jones Industrial Average?
A high debt-to-equity ratio MOST likely indicates:
A. Low leverage
B. Conservative capitalization
C. High financial leverage
D. Excess liquidity
What is high financial leverage?
A firm selling securities from its own inventory is acting as:
A. Agent
B. Broker
C. Principal
D. Market center
What is a principal?
Equity settlement for corporate securities occurs on:
A. T+1
B. T+2
C. T+3
D. Trade date
What is T+2?
Which action violates suitability rules?
A. Rebalancing portfolios
B. Churning accounts
C. Updating objectives
D. Diversifying holdings
What is churning accounts?
This measure evaluates return relative to risk taken.
What is the Sharpe ratio?
This filing contains audited financial statements and MD&A.
What is Form 10-K?
This order provides price protection but no execution guarantee.
What is a limit order?
This form reports suspicious activity to regulators.
What is a SAR (Suspicious Activity Report)?
This standard applies when a firm recommends a strategy, not just a trade
What is strategy-based suitability?
Diversification MOST directly reduces which type of risk?
A. Systematic
B. Market
C. Unsystematic
D. Interest-rate
What is unsystematic risk?
Book value per share is calculated using:
A. Market price
B. Net income
C. Equity ÷ common shares
D. Assets ÷ liabilities
What is equity divided by common shares?
Best execution across markets is enforced by:
A. Regulation T
B. Regulation M
C. Regulation NMS
D. Regulation SHO
What is Regulation NMS?
A margin call occurs when:
A. Market value rises
B. Equity falls below maintenance
C. Interest rates change
D. Trades fail
What is equity falling below maintenance?
Disputes under $50,000 are typically handled by:
A. Court litigation
B. Mediation only
C. Arbitration
D. SEC enforcement
What is arbitration?
This term describes excess return above what is expected for a given level of risk.
What is alpha?
This ratio measures management’s efficiency using shareholders’ capital.
What is return on equity?
This prohibited practice involves trading ahead of customer orders.
What is front-running?
This document reports customer complaints to FINRA.
What is Form U4/U5 disclosure?
This process attempts to settle disputes without a binding decision.
What is mediation?
A portfolio with a beta of 1.3 is expected to do which of the following?
A. Be less volatile than the market
B. Move opposite the market
C. Match the market
D. Be more volatile than the market
What is be more volatile than the market?
A declining gross margin MOST likely means:
A. Lower revenues
B. Higher operating expenses
C. Higher cost of goods sold
D. Increased dividends
What is higher cost of goods sold?
Which entity guarantees completion of trades after execution?
A. FINRA
B. SEC
C. Clearing corporation
D. Exchange
What is a clearing corporation?
Which account is NOT eligible for margin?
A. Individual
B. Joint
C. Corporate
D. Custodial
What is a custodial account?
FINRA Rule 2111 relates to:
A. Margin
B. Short selling
C. Suitability
D. Best execution
What is suitability?
This strategy adjusts risk by changing the mix of asset classes.
What is asset allocation?
Retained earnings represent this.
What are profits reinvested in the business?
This order must be executed immediately in full or canceled.
What is a fill-or-kill order?
This practice freezes assets during legal disputes.
What is an account restriction?
This type of suitability applies to individual trades.
What is transaction-based suitability?
Which customer factor MOST affects suitability recommendations?
A. Market conditions
B. Customer objectives
C. Index performance
D. Trading volume
What are customer objectives?
Creditors are MOST concerned with which ratio?
A. P/E
B. Dividend payout
C. Debt-to-equity
D. EPS
What is the debt-to-equity ratio?
Market-wide circuit breakers are triggered by:
A. Single-stock volatility
B. Liquidity shortages
C. Index percentage declines
D. Margin calls
What are index percentage declines?
Regulation T applies to:
A. Maintenance margin
B. Initial margin
C. Portfolio margin
D. Futures margin
What is initial margin?
Excessive trading to generate commissions is known as:
A. Arbitrage
B. Front-running
C. Churning
D. Hedging
What is churning?