Understanding Basic Stock Terms

What is a stock?

• A type of bond issued by companies

• A share in the ownership of a company

• A loan given to a company

• A type of currency

Which of the following best describes a dividend?

• The interest paid on a bond

• A portion of a company's earnings distributed to shareholders

• The price at which a stock is bought

• The total value of a company's assets

What does the term "bull market" refer to?

• A market in which prices are falling

• A market in which prices are rising

• A market with no price changes

• A market with high volatility

Explain the concept of "market capitalization."

• The total value of a company's outstanding shares of stock

• The total revenue of a company

• The total profit of a company

• The total number of employees in a company

What is a "bear market"?

• A market in which prices are rising

• A market in which prices are falling

• A market with no price changes

• A market with high volatility

How is the "price-to-earnings (P/E) ratio" calculated?

• By dividing the market value per share by the earnings per share

• By multiplying the market value per share by the earnings per share

• By subtracting the earnings per share from the market value per share

• By adding the market value per share to the earnings per share

What does "IPO" stand for in the stock market?

• Initial Public Offering

• International Purchase Order

• Internal Price Option

• Investment Portfolio Overview

Describe the role of a stockbroker.

• A person who manages a company's finances

• A person who buys and sells stocks on behalf of clients

• A person who audits financial statements

• A person who sets stock prices

What is a "stock exchange"?

• A place where bonds are traded

• A marketplace where stocks are bought and sold

• A platform for currency exchange

• A type of investment fund

What is meant by "stock liquidity"?

• The ease with which a stock can be bought or sold without affecting its price

• The amount of dividends a stock pays

• The number of shares a company has issued

• The volatility of a stock's price