Fundamental and Technical Analysis Flashcards

Which financial statement would an analyst primarily use to assess a company's liquidity position?

Answer: Balance sheet

The balance sheet shows current assets and current liabilities, which are used to calculate liquidity ratios like the current and quick ratios.

Relative Strength Index (RSI) values above 70 typically signal a stock is:

Answer: Overbought and potentially due for a pullback

An RSI above 70 indicates overbought conditions, suggesting the security may be overvalued and due for a price correction.

The price-to-book (P/B) ratio compares a stock's market price to its:

Answer: Net asset value per share

P/B ratio divides market price per share by book value per share (total equity divided by shares outstanding), showing how much investors pay per dollar of net assets.

A 'head and shoulders' pattern in technical analysis signals a potential:

Answer: Reversal from an uptrend to a downtrend

The head and shoulders pattern is a bearish reversal formation with three peaks where the middle peak is the highest, signaling the uptrend is ending.

Free cash flow is best defined as:

Answer: Operating cash flow minus capital expenditures

Free cash flow = Operating Cash Flow − Capital Expenditures, representing cash available after maintaining and expanding the asset base.

In the context of Dow Theory, a 'secondary trend' typically lasts:

Answer: Three weeks to three months

Secondary trends in Dow Theory are shorter-term counter-movements lasting three weeks to three months within the primary trend.

When a company's EV/EBITDA multiple is significantly lower than its industry peers, it may suggest the stock is:

Answer: Potentially undervalued relative to peers

A lower EV/EBITDA multiple than peers suggests investors are paying less for each dollar of operating earnings, potentially indicating undervaluation.