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1.
According to the father of value investing, Benjamin Graham, in the short run the market is like a _______.
Voting machine. In the short run, the market sees the popularity of a company rather than its substance. A voting machine assesses its popularity.
2.
Which of the following best defines a stock?
A stock is an ownership interest in a company. Although companies receive money from stock offerings, it is more important to remember that a stock represents a stake in a company. Stocks should not be considered vehicles for speculative trading.
3.
In return for getting a relatively low rate of return on their bond investments, bondholders enjoy _______ shareholders.
Less risk than. Besides less risk, they also get an earlier claim on a company's assets should it go bankrupt.
4.
A company's return on capital is calculated by _______.
Dividing profit by invested capital.
5.
When are shareholders entitled to get their cut of a company's profits?
After everyone else. This is one of the risks of being a shareholder -- you are always paid last. On the other hand, you get potentially unlimited earnings possibilities once you do get paid.