The price-earnings (PE) ratio measures

investors’ expectations about a company’s performance

How should you begin researching an investment you might select?

Read the company’s profile and annual report

Return on equity (ROE) measures management’s ability to make a profit

from the money that shareholders have invested

What is the benefit of having written records of financial transactions?

Information is accurate, accessible, and meaningful

Too much diversification in a financial portfolio can

dilute the value of big gains on an individual stock

Why are accurate accounting records important to a business?

They show the business how it is doing

The definition of a budget is

an estimate of income and expense for a specific period

Ratios are calculated by

multiplying one number by another

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HSB POF Review #3

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Questions 17

Answers

1
The process of keeping the financial records of a business is known as
Financing
Accounting
Controlling
Bookkeeping
2
The price-earnings (PE) ratio measures
management’s ability to streamline operations
stock price compared to shareholder’s equity
stock price compared to sales
investors’ expectations about a company’s performance
3
Before you invest for the long term, determine which of the following:
What you want to accomplish
What will affect your investment in the short term
What your advisor recommends you do
What others are doing
4
How should you begin researching an investment you might select?
Visit the company headquarters
Read the company’s profile and annual report
Purchase a product the company produces
Compare the company’s strengths and weaknesses
5
Investing in growth stocks is a strategy that builds wealth through
buying low and selling high
capital appreciation
a regular fixed income
paid dividends
6
When selecting an investment, a chart is most helpful in comparing
the effect of competition
quantitative factors
growth strategies
management’s performance
7
When should an investor sell his/her investments?
Not very often
When the investments lose in the short term
Frequently
When the investor feels like making a change
8
Return on equity (ROE) measures management’s ability to make a profit
by becoming shareholders of smaller firms
by becoming more efficient in operations
from the money generated by sales
from the money that shareholders have invested
9
The most important reason for budgeting is to
Plan for retirement
Save for a rainy day
Increase personal wealth
Accomplish a financial goal
10
Dividing investment funds among categories of assets like stocks, bonds, and mutual funds is
selection strategy
asset allocation
investment averaging
implementation
11
What is the benefit of having written records of financial transactions?
Accounting is simplified and less detailed
Information is accurate, accessible, and meaningful
Investments are increased, and profit is reinvested
Expenses are reduced, and income is increased
12
Too much diversification in a financial portfolio can
dilute the value of big gains on an individual stock
keep fund managers from doing their jobs
prevent a stock from growing in value
cause other investors to avoid a particular stock
13
Budgets can be described in terms of
savings, sales, and success
desires, debt, and discipline
account books, bills, and bankruptcy
money, maps, and management
14
Why are accurate accounting records important to a business?
They increase the return on investments
They show the business how it is doing
They give the business an image of success
They prevent any financial losses
15
The definition of a budget is
a plan for limiting your personal spending
an estimate of income and expense for a specific period
the key to a business’s success
a method for evaluating a manager’s performance
16
Ratios are calculated by
multiplying or dividing, depending on the ratio
dividing one number by another
multiplying one number by another
adding and subtracting
17
Which of the following is essential for making wise investment decisions:
Wealth
Intelligence
Knowledge
Age

HSB POF Review #3 Flashcards | StudBud