SERIES 65 COMPREHENSIVE LATEST QUESTIONS
AND ANSWERS SURE A+
✔✔Share capital - ✔✔the value of the assets of a company held as shares
✔✔Income Statement
(also known as a P&L or
profit and loss statement) - ✔✔tells what happens over a period of time:
1. Revenue
a. Sales
b. Cost of Goods Sold
c. Gross Profit
2. Expenses
a. Rent
b. Salaries and Wages
c. Advertising
d. Insurance
e. Total Expenses
3. Net Income
✔✔Earnings per Share (EPS) - ✔✔1. an indicator of a company's profitability.
2. how much money shareholders would receive for each share owned if company
distributed all net income for the period.
3. the monetary value of earnings per outstanding share of common stock for a
company.
4. Formula:
= Total earnings (Net income)/Number of shares outstanding
5. A company's earnings are found on the income statement.
✔✔Market Value per Share - ✔✔the current stock price of a company.
,✔✔Book value - ✔✔1. the value per share if the company was liquidated.
2. The book value of a share comes from the balance sheet.
✔✔P/E Ratio - ✔✔1. the ratio of a company's share price to its earnings per-share .
2. Formula:
= Market Value per Share / Earnings per Share (EPS)
3. A company's earnings are found on the income statement.
4. Historically, the average P/E ratio in the market has been around 15-25.
✔✔P/B ratio - ✔✔1. the ratio of a company's share price to its book value.
2. Formula:
= Market Value per Share / Book value
3. The book value of a share comes from the balance sheet.
4. A stock selling at a high P/B ratio, such as 3 or more, may represent a popular growth
stock with minimal book value.
✔✔Statement of Retained Earnings - ✔✔Bridges between two statements - provides
info to the Balance Sheet from the Income Statement.
1. Retained Earnings, Beginning
2. Net Income
3. Dividends Paid to Shareholders
4. Retained Earnings, Ending
✔✔Cash Flow Statement - ✔✔reports cash inflows and outflows:
1. Cash Flow From Operating Activities
a. Cash Receipts
b. Cash paid to suppliers
c. Cash paid to employees
d. Income taxes paid
Net Cash Flow From Operating Activities
2. Cash Flow From Investing Activities
a. Cash spent on purchase of equipment
Net Cash Flow From Investing Activities
3. Cash Flow From Financing Activities
a. Dividends paid to shareholders
b. Cash received from issuing shares
Net Cash Flow From Financing Activities
4. Net Increase in cash:
✔✔Money market - ✔✔where most liquid items trade (1 year or less)
, ✔✔Over-the-counter (OTC) - ✔✔is done directly between two parties, without any
supervision of an exchange.
✔✔Secondary market - ✔✔where investors purchase securities or assets from other
investors, rather than from issuing companies. Example: the New York Stock Exchange,
or NASDAQ.
✔✔Common stock - ✔✔1. represents equity ownership in a corporation
2. provides voting rights
3. allows a share of the company's success through dividends (cash or additional
shares of stock) and/or capital appreciation.
4. Are the riskiest investment investors can make or may have the highest return.
5. Has NO automatic set par value. Par value set by the board of directors.
✔✔Restricted stock - ✔✔1. is common stock of a company that is not freely saleable
(subject to Rule 144).
2. There are two categories of restricted stock: private placement and control stock.
✔✔Private placement stock - ✔✔Restricted shares of stock that are unregistered non-
exempt.
✔✔Control stock - ✔✔Restricted shares of stock held by an insider of the corporation.
✔✔Rule 144 - ✔✔1. sets forth the holding period requirement of 6 months for a
reporting issuer and 1 year for a non-reporting issuer.
2. sets forth the method of sale and volume restrictions for Control stock.
✔✔Authorized stock - ✔✔2. the maximum number of shares that a corporation is legally
permitted to issue, as specified in its articles of incorporation, also known as "authorized
shares" or "authorized capital stock.
2. is listed in the capital accounts section of the balance sheet.
✔✔Outstanding shares/stock - ✔✔1. a company's stock currently held by all its
shareholders, including share blocks held by institutional investors and Restricted
shares owned by the company's officers and insiders (excluding treasury stock held by
the company itself).
2. are shown on a company's balance sheet under the heading "Capital Stock."
3. used in calculating a company's market capitalization, earnings per share (EPS) and
cash flow per share (CFPS)
✔✔Preferred stock - ✔✔1. represent partial ownership but NO voting rights.
2. pays a fixed dividend, if any at all, before any dividends are paid to common stock,
that does not fluctuate.
3. takes precedence over common stock in the event of a liquidation.
4. For investors looking for income.
AND ANSWERS SURE A+
✔✔Share capital - ✔✔the value of the assets of a company held as shares
✔✔Income Statement
(also known as a P&L or
profit and loss statement) - ✔✔tells what happens over a period of time:
1. Revenue
a. Sales
b. Cost of Goods Sold
c. Gross Profit
2. Expenses
a. Rent
b. Salaries and Wages
c. Advertising
d. Insurance
e. Total Expenses
3. Net Income
✔✔Earnings per Share (EPS) - ✔✔1. an indicator of a company's profitability.
2. how much money shareholders would receive for each share owned if company
distributed all net income for the period.
3. the monetary value of earnings per outstanding share of common stock for a
company.
4. Formula:
= Total earnings (Net income)/Number of shares outstanding
5. A company's earnings are found on the income statement.
✔✔Market Value per Share - ✔✔the current stock price of a company.
,✔✔Book value - ✔✔1. the value per share if the company was liquidated.
2. The book value of a share comes from the balance sheet.
✔✔P/E Ratio - ✔✔1. the ratio of a company's share price to its earnings per-share .
2. Formula:
= Market Value per Share / Earnings per Share (EPS)
3. A company's earnings are found on the income statement.
4. Historically, the average P/E ratio in the market has been around 15-25.
✔✔P/B ratio - ✔✔1. the ratio of a company's share price to its book value.
2. Formula:
= Market Value per Share / Book value
3. The book value of a share comes from the balance sheet.
4. A stock selling at a high P/B ratio, such as 3 or more, may represent a popular growth
stock with minimal book value.
✔✔Statement of Retained Earnings - ✔✔Bridges between two statements - provides
info to the Balance Sheet from the Income Statement.
1. Retained Earnings, Beginning
2. Net Income
3. Dividends Paid to Shareholders
4. Retained Earnings, Ending
✔✔Cash Flow Statement - ✔✔reports cash inflows and outflows:
1. Cash Flow From Operating Activities
a. Cash Receipts
b. Cash paid to suppliers
c. Cash paid to employees
d. Income taxes paid
Net Cash Flow From Operating Activities
2. Cash Flow From Investing Activities
a. Cash spent on purchase of equipment
Net Cash Flow From Investing Activities
3. Cash Flow From Financing Activities
a. Dividends paid to shareholders
b. Cash received from issuing shares
Net Cash Flow From Financing Activities
4. Net Increase in cash:
✔✔Money market - ✔✔where most liquid items trade (1 year or less)
, ✔✔Over-the-counter (OTC) - ✔✔is done directly between two parties, without any
supervision of an exchange.
✔✔Secondary market - ✔✔where investors purchase securities or assets from other
investors, rather than from issuing companies. Example: the New York Stock Exchange,
or NASDAQ.
✔✔Common stock - ✔✔1. represents equity ownership in a corporation
2. provides voting rights
3. allows a share of the company's success through dividends (cash or additional
shares of stock) and/or capital appreciation.
4. Are the riskiest investment investors can make or may have the highest return.
5. Has NO automatic set par value. Par value set by the board of directors.
✔✔Restricted stock - ✔✔1. is common stock of a company that is not freely saleable
(subject to Rule 144).
2. There are two categories of restricted stock: private placement and control stock.
✔✔Private placement stock - ✔✔Restricted shares of stock that are unregistered non-
exempt.
✔✔Control stock - ✔✔Restricted shares of stock held by an insider of the corporation.
✔✔Rule 144 - ✔✔1. sets forth the holding period requirement of 6 months for a
reporting issuer and 1 year for a non-reporting issuer.
2. sets forth the method of sale and volume restrictions for Control stock.
✔✔Authorized stock - ✔✔2. the maximum number of shares that a corporation is legally
permitted to issue, as specified in its articles of incorporation, also known as "authorized
shares" or "authorized capital stock.
2. is listed in the capital accounts section of the balance sheet.
✔✔Outstanding shares/stock - ✔✔1. a company's stock currently held by all its
shareholders, including share blocks held by institutional investors and Restricted
shares owned by the company's officers and insiders (excluding treasury stock held by
the company itself).
2. are shown on a company's balance sheet under the heading "Capital Stock."
3. used in calculating a company's market capitalization, earnings per share (EPS) and
cash flow per share (CFPS)
✔✔Preferred stock - ✔✔1. represent partial ownership but NO voting rights.
2. pays a fixed dividend, if any at all, before any dividends are paid to common stock,
that does not fluctuate.
3. takes precedence over common stock in the event of a liquidation.
4. For investors looking for income.
