Understanding Stocks and Bonds

What does purchasing stock in a company make you?

• An employee

• A bondholder

• A part-owner

• A creditor

What is the primary difference between stocks and bonds?

• Stocks and bonds are both forms of ownership

• Stocks represent ownership, bonds are loans

• Stocks and bonds are both forms of loans

• Bonds represent ownership, stocks are loans

What does owning a bond make you in relation to the company?

• A shareholder

• A CEO

• A lender

• An employee

What does the equity of a company represent?

• The total assets of the company

• The total debts of the company

• The assets minus liabilities

• The liabilities plus the assets

If Company X has assets worth $100 million and liabilities of $80 million, what is the equity?

• $20 million

• $180 million

• $100 million

• $80 million

What does a balance sheet display?

• The company's future financial projections

• The company's assets, liabilities, and equity

• Only the company's debts

• Only the company's earnings

How is the value of each share determined?

• Subtracting liabilities from assets and multiplying by shares

• Adding assets and liabilities and dividing by shares

• Dividing equity by the number of shares

• Dividing total liabilities by number of shares

What might 'current assets' include?

• Long-term investments

• Property and equipment

• Cash or items easily converted to cash

• Shares of other companies

Why might someone sell a stock below its book value?

• They predict the stock will rise in value

• They require immediate cash

• They are unaware of the book value

• They believe the company's assets are overvalued

What is 'market cap'?

• A limit on the market price of shares

• The total value of the company's shares in the market

• A cap on the number of shares a company can sell

• The maximum debt a company can hold