Stock Market Basics: Making Money and Dividends

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Questions and Answers

What is a common way to make money in the stock market?

  • Only investing in companies that pay dividends
  • Not investing in the stock market at all
  • Stock price goes down and you sell
  • Stock price goes up and you sell (correct)

What is the purpose of dividends in the stock market?

  • To discourage people from investing
  • To provide a steady income for shareholders (correct)
  • To increase the stock price
  • To decrease the company's profits

What does it mean when it is said 'not all companies pay dividends'?

  • Companies that pay dividends do not care about investors
  • Companies that don't pay dividends are more profitable
  • Companies have different strategies regarding distributing profits (correct)
  • Companies that pay dividends are less successful

How does diversifying your investment portfolio help manage risk?

<p>By spreading investments across different assets (A)</p> Signup and view all the answers

Which type of investment involves buying a small piece of ownership in a company?

<p>Stocks (B)</p> Signup and view all the answers

What is the primary purpose of short quiz and pop quiz mentioned in the text?

<p>To evaluate students' knowledge on market trends (A)</p> Signup and view all the answers

What does a Bull Market represent?

<p>Stock prices are rising and the economy is doing well (B)</p> Signup and view all the answers

In a Bear Market, what is the general sentiment about the economy?

<p>The economy is bad and a recession is looming (B)</p> Signup and view all the answers

What does '52-Week Hi and Low' refer to in a stock table?

<p>The highest and lowest prices at which a stock has traded over the past year (C)</p> Signup and view all the answers

What does 'Price/Earnings Ratio' indicate in finance?

<p>The current stock price divided by earnings per share for the last four quarters (C)</p> Signup and view all the answers

What does 'Net Change' represent in a stock table?

<p>The net change from the previous day's closing price (D)</p> Signup and view all the answers

What aspect of a stock does 'Dividend Per Share' highlight?

<p>The annual dividend payment per share (A)</p> Signup and view all the answers

What is the main difference between Common Stock and Preferred Stock?

<p>Common Stock offers one vote per share, while Preferred Stock may not include voting rights. (B)</p> Signup and view all the answers

What is the advantage of holding Blue Chip Stocks in a portfolio?

<p>They are less volatile and generally considered stable investments. (C)</p> Signup and view all the answers

In the context of stocks, what does it mean to be a 'residual owner'?

<p>The owner has the last claim on the company's assets and earnings. (B)</p> Signup and view all the answers

What distinguishes Primary Markets from Secondary Markets in the context of the stock market?

<p>Primary Markets involve creating new stocks, while Secondary Markets involve trading existing stocks. (B)</p> Signup and view all the answers

What is the main distinction between Short-term and Long-term investments in the stock market?

<p>Short-term investments last up to 2 months, while Long-term investments last more than 9 months. (A)</p> Signup and view all the answers

Why do companies not directly participate in the buying and selling of their own stock?

<p>To prevent market manipulation and ensure fair trading practices. (D)</p> Signup and view all the answers

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