Stock Advisor Trainer 4

Question 1

A Stock Advisor trainer describes 'margin of safety.' What does it mean?

Accepted Answer

Buying below estimated intrinsic value to cushion against error

Answer

Using maximum leverage on a trade

Answer

Holding only cash positions

Answer

Trading without stop losses

Question 2

What is the main risk of investing on margin (borrowed funds)?

Accepted Answer

Losses are amplified and can exceed the initial investment

Answer

Returns are capped at zero

Answer

It eliminates volatility

Answer

It guarantees dividends

Question 3

A trainee asks about market capitalization. How is it calculated?

Accepted Answer

Share price multiplied by total shares outstanding

Answer

Revenue minus expenses

Answer

Total assets minus liabilities

Answer

Dividend per share times P/E

Question 4

Why does a trainer emphasize a long-term horizon for equity investing?

Accepted Answer

It lets compounding work and smooths short-term volatility

Answer

Stocks always rise daily

Answer

It avoids all taxes

Answer

It removes the need for research

Question 5

What does the 'free cash flow' figure tell an investor?

Accepted Answer

Cash a company generates after capital expenditures

Answer

Total revenue before costs

Answer

The stock's dividend yield

Answer

Number of shares outstanding

Question 6

A trainer flags a stock with declining revenue but rising EPS. What might explain this?

Accepted Answer

Share buybacks or cost cutting boosting per-share earnings

Answer

Revenue is always equal to EPS

Answer

It is impossible for this to happen

Answer

The company doubled its share count

Question 7

Which order type guarantees execution but not price?

Accepted Answer

Market order

Answer

Limit order

Answer

Stop-limit order

Answer

Good-till-canceled limit order