Stock Jobs Basics 2 — Questions and Answers
Question 1: What does owning a share of common stock primarily represent?
- A loan to the company
- A fractional ownership stake in the company (Correct answer)
- A guaranteed fixed interest payment
- A claim on company debt only
Correct answer: A fractional ownership stake in the company
Common stock represents a fractional ownership interest (equity) in the issuing company.
Question 2: What is a stock's 'market capitalization'?
- Total revenue for the year
- Share price multiplied by total outstanding shares (Correct answer)
- Total dividends paid annually
- Book value of company assets
Correct answer: Share price multiplied by total outstanding shares
Market cap equals the current share price times the number of outstanding shares.
Question 3: Which order type executes immediately at the best available current price?
- Limit order
- Stop order
- Market order (Correct answer)
- Trailing stop order
Correct answer: Market order
A market order fills right away at the best available price.
Question 4: What is a dividend?
- A fee charged by the broker
- A portion of company profits paid to shareholders (Correct answer)
- The difference between bid and ask
- A penalty for selling early
Correct answer: A portion of company profits paid to shareholders
A dividend is a distribution of company profits to shareholders.
Question 5: The 'bid' price in a stock quote represents what?
- The highest price a buyer will pay (Correct answer)
- The lowest price a seller will accept
- The last traded price
- The opening price of the day
Correct answer: The highest price a buyer will pay
The bid is the highest price buyers are currently willing to pay.
Question 6: What does the ticker symbol of a stock identify?
- The stock's sector
- The unique abbreviation for a publicly traded company (Correct answer)
- The dividend yield
- The exchange's trading hours
Correct answer: The unique abbreviation for a publicly traded company
A ticker symbol is the unique short code identifying a publicly traded security.
Question 7: What is an IPO?
- A type of dividend reinvestment
- The first sale of a company's stock to the public (Correct answer)
- An internal profit order
- A penalty fee for late trades
Correct answer: The first sale of a company's stock to the public
An IPO (initial public offering) is when a company first sells shares to the public.
Stock Jobs Basics 2
What does owning a share of common stock primarily represent?