Series 66: Exercise

Exercise

Answer the following questions

1. 1. In fundamental stock analysis, the ____ is a snapshot of a company’s financial condition at a point in time, whereas the ____ shows the results of the company’s earnings and expenses over a particular period of time.
2. I. Income statement
3. II. Pro forma
4. III. Quick ratio
5. IV. Balance sheet
6. A. I and IV
7. B. II and IV
8. C. IV and I
9. D. III and II
10. 2. In a typical income statement, which of the following items is not deducted from gross revenues to arrive at operating income?
11. A. Taxes
12. B. Selling, general, and administrative expenses
13. C. Depreciation and amortization
14. D. Cost of goods sold
15. 3. A fundamental analyst would typically be least interested in which of the following?
16. A. EPS
17. B. Cash flow
18. C. Performance of the S&P 500
19. D. P/E ratio
20. 4. All of the following would be found on the company’s income statement except:
21. A. Sales
22. B. Cost of goods sold
23. C. Pre-tax income
24. D. Owner’s equity

Answers

1. 1. C. Income statements are always stated for a time period, whereas balance sheets are stated as of a particular date.
2. 2. A. Taxes are the last item deducted, comprising the difference between pre-tax income and net income after tax.
3. 3. C. A fundamental analyst is most concerned with the “fundamentals” of the company itself, such as the P/E ratio, EPS, and cash flow, and much less about the day-to-day activity of the stock or the market at large. I