Equity Markets and Stock Analysis Test Flashcards
7 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Equity Markets and Stock Analysis Test flashcards as text
What is the primary purpose of a stock exchange like the NYSE or NASDAQ?
Answer: To provide a regulated marketplace for buying and selling securities
Stock exchanges provide a regulated, transparent venue where buyers and sellers can trade listed securities, ensuring fair price discovery and transaction integrity.
In equity analysis, what does 'EPS dilution' refer to?
Answer: A decrease in earnings per share due to an increase in total shares outstanding
EPS dilution occurs when the total number of shares increases (e.g., through stock options, convertible bonds, or new share issuances), reducing each existing share's portion of earnings.
Which of the following characterizes a 'growth stock'?
Answer: Expected to grow faster than average, often with high P/E ratios
Growth stocks are companies expected to increase revenues and earnings faster than the market average, often reinvesting profits rather than paying dividends, and commanding premium valuations.
What does 'price discovery' mean in the context of equity markets?
Answer: The mechanism by which buyers and sellers determine a fair market price through trading
Price discovery is the natural market process where the interaction of supply and demand from buyers and sellers establishes the current fair market price of a security.
A 'circuit breaker' in U.S. equity markets is triggered when:
Answer: The S&P 500 declines by specified percentage thresholds in a single day
U.S. market-wide circuit breakers halt trading when the S&P 500 falls 7%, 13%, or 20% in a single day to prevent panic selling and allow markets to stabilize.
What is 'book value per share' and how is it calculated?
Answer: Total equity divided by shares outstanding, showing net asset value per share
Book value per share equals total shareholders' equity divided by total shares outstanding, representing the net asset value attributable to each share based on accounting records.
Which of the following best describes 'sector rotation' as an investment strategy?
Answer: Shifting investments between industry sectors based on economic cycle phases
Sector rotation involves moving capital between different industry sectors to capitalize on each sector's tendency to outperform or underperform at specific stages of the economic cycle.