Stock Market 1
What is the definition of Beta?
Beta is a measure of the volatility of a stock as compared to the market as a whole
What are the three main asset classes?
Stocks, bonds, and cash
What are the three financial statements?
Income Statement, balance sheet, cash flow statement
How can you value a company?
DCF, comparable companies, precedent transactions
What is the difference between a checking account and a savings account?
Checking accounts are meant to be used for spending money, while a savings account has federally-regulated limits on how often you can take cash out every month
What is the S&P 500?
The S&P 500 is a stock market index that measures the performance of roughly 500 large companies in the US
What is the difference between inflation and deflation?
Inflation occurs when the prices of goods and services rise, while deflation occurs when those prices decrease
What does EBITDA stand for?
Earnings before interest, taxes, depreciation and amortization
What is the Gold Rule of Thumb in Asset Allocation?
age = % of asset conservative, 100-age = % risky
What is the official tax due date(in normal pre-covid times)?
April 15th
What are the two main stock exchanges in the US?
NYSE and Nasdaq
Name 3 business sectors
Healthcare, communication services, IT, industrials, consumer staples, energy, consumer discretionary, utilities, real estate, materials, Financials
What’s the difference between the current ratio and the quick ratio?
Quick ratio excludes inventory and prepayments
Where does “Wall Street” get its name?
The wooden wall dutch colonists built to defend Amsterdam
Who said “...in this world nothing can be said to be certain, except death and taxes"?
Benjamin Franklin
How can we calculate the market capitalization of a company?
Share price x number of outstanding shares
What is the difference between an annuity and a perpetuity?
An annuity is a set of payments received for a set period of time. Perpetuities are set payments received forever.
What is the time value of money concept?
A dollar today is worth more than a dollar tomorrow
Show how a $10 Depreciation expense affects the 3 financial statements? (Assume 40% Tax Rate)
IS=Net Income reduced by 10-0.4=0.6
CF= Net Income down by 10 and Depreciation is added back by 6 (Cash goes up by 6)
BS= Cash is up by 4, PPE is down by 10 (Assets fall by 6). Retained Earnings down by 6. Accounting Equation holds.
Name the Top 3 Banks in the USA by Total Assets
JPMorgan Chase, Bank of America, Wells Fargo
What is the relationship between the price and yield of a bond?
It is an inverse relationship
What is the difference between short and long positions?
If an investor has long positions, it means that the investor owns those shares of stocks, expecting the price to increase. By contrast, if the investor has short positions, it means that the investor owes those stocks to someone, but does not actually own them yet, which is normally done when they expect the price to drop
What is the accounting standard that the USA follows?
GAAP (Generally accepted accounting principles)
What is alpha?
The excess return of an investment relative to the return of a benchmark index is the investment’s alpha
What is the etymology of the word ‘tax’?
The latin, taxo, meaning I estimate