Transcript Investments Vocab Review

Investments Vocabulary
Review
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When a company grants you twice as
many shares and the price is cut in
half?
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2 for 1 stock split
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What is a blue chip stock?
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Stock that is considered safe and
issued generally by a strong and well
respected company (which tend to
be large cap)
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What is the amount of goods and
services people are willing to buy?
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Demand
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What is a penny stock?
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A stock that typically sells for less
than $1 per share.
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What is the difference between a bull
market and a bear market?
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Bull is optimistic about economy and
stocks (which results in an increase
in stock prices) and bear is
pessimistic which results in a
decrease in stock prices.
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What is the process in which interest
is earned on both the principal and
on any previously earned interest?
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Compounding
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What is the name for the rise in the
level of prices for goods and
services?
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Inflation
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What is the study of the decisions
that go into making, distributing and
using goods and services?
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Economics
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What type of stock remains stable
during declines in the economy?
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Defensive stock (like utility
companies who provides gas and
electricity even in tough economic
times)
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What type of stock provides the most
basic form of corporate ownership
and entitles you to voting privileges?
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Common stock
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The central banking organization of
the U.S.?

Federal Reserve System (“The Fed”)
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What is a liquid investment?
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An investment able to be converted
to cash very quickly.
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What is the cost of money or the cost
to borrow money?
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Interest
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A type of stock that pays higher than
average dividends compared to other
stocks and those dividends are more
predictable.
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Income stocks
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If a share price was $5 for a
company that you were evaluating,
would you buy it?
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Can’t fool you – you don’t have
enough information to make that
decision. Share price alone is not
enough. What else should you look
at?
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EPS
PE ratio
52-week highs and lows
History of stock
Analysts predictions and outlook for
company and industry
News related to company
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Corporate profits that are put back
into the company?
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Retained earnings.
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Corporate profits paid out to
shareholders.
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Dividends
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What is the dividend yield?
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The annual dividend divided by the
current share price. It provides an
interest rate or a rate of return
based upon its dividend.
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What does EPS stand for?
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Earnings Per Share
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How is earnings per share
calculated?
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Net Income (Profit) divided by total
number of outstanding shares
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What does PE ratio mean?
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Price to Earnings Ratio.
It’s the Market Value per share
divided by EPS.
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What does PE Ratio tell you?
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If a stock is overpriced (overvalued)
or underpriced (undervalued)
relative to other companies in the
same industry.
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A PE of 72 means that you are
paying $72 per share for every $1 in
earnings.
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Share price is $20.
Total outstanding shares 25 million.
Earnings (profit) of $20 million
EPS is .8 (20 million/25 million)
PE ratio of 25. (price/EPS)
What is its market capitalization?
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25,000,000 x 20 =
500,000,000
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