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Finance Basics Flashcards

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1
Q

What is the primary purpose of investing?

A

To grow wealth over time, preserve capital, generate income, and achieve financial goals, balancing risk and return.

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2
Q

What are the main types of investments?

A

Equities, Fixed Income, Commodities, Currencies, Derivatives, Mutual Funds, ETFs.

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3
Q

What is the risk-return tradeoff?

A

Higher potential returns come with higher risk, and vice versa.

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4
Q

What is diversification?

A

Spreading investments across assets to reduce overall risk.

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5
Q

What is asset allocation?

A

Dividing a portfolio among asset types based on risk tolerance and goals.

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6
Q

What is rebalancing?

A

Adjusting the portfolio periodically to maintain the desired asset allocation.

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7
Q

Name key economic indicators.

A

GDP, unemployment rate, inflation (CPI, PPI), interest rates, consumer confidence, manufacturing indices.

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8
Q

How do economic indicators affect markets?

A

They signal the economy’s health, influencing investment decisions and market performance.

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9
Q

What factors affect currency values?

A

Interest rates, inflation, economic growth, political stability, trade balances.

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10
Q

What is a forex pair?

A

Quotation of one currency against another (e.g., EUR/USD).

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11
Q

What is appreciation vs. depreciation in currencies?

A

Appreciation: currency value rises; Depreciation: currency value falls.

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12
Q

What is yield?

A

Return on a bond, expressed as a percentage of its price.

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13
Q

What is duration?

A

Measures bond price sensitivity to interest rate changes.

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14
Q

What is market capitalization?

A

Total value of a company’s outstanding shares (Price × Shares Outstanding).

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15
Q

What is the Bloomberg Terminal?

A

A platform providing real-time financial data, analytics, trading tools, and news.

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16
Q

Common Bloomberg functions to know:

A

WEI – World equity indices
BOND – Bond analytics
FXIP – Currency rates
EQS – Equity screening
N – News

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17
Q

What are commodities?

A

Raw materials or agricultural products that can be traded (oil, gold, wheat).

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18
Q

Hard vs. Soft commodities?

A

Hard: mined/extracted (oil, gold). Soft: agricultural (corn, coffee).

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19
Q

What is a commodity future?

A

Contract to buy/sell a commodity at a predetermined price and date.

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20
Q

What is a stock option?

A

Contract giving right (not obligation) to buy (call) or sell (put) a stock at a set price before expiration.

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21
Q

Difference between call and put options?

A

Call: right to buy; Put: right to sell.

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22
Q

Difference between ETFs and mutual funds?

A

ETFs trade like stocks; mutual funds priced once daily.

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23
Q

What is a dividend?

A

Portion of company profits paid to shareholders.

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24
Q

How does interest rate affect bonds and stocks?

A

Rising rates: bond prices fall, equity valuations can decrease; Falling rates: bond prices rise, equities may benefit.

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25
What is liquidity?
Ease of buying/selling an asset without affecting its price.
26
What is the yield curve?
Graph showing bond yields across maturities; normal, inverted, flat curves indicate economic conditions.
27
What is a balance sheet?
represents a snapshot a company's financial position at a specific point in time. it provides information on a company's assets, liabilities, and shareholders' equity. its used to help users assess a company's financial health, liquidity, and leverage.
28
What is capital structure analysis?
focuses on analyzing a company's mix of debt and equity financing. it helps users assess a company's leverage, solvency, financial risk, and the potential impact on equity valuation.
29
What is cash flow?
statement that tracks the inflow and outflow of cash from a company's operating, investing, and financing activities over a specific period. meant to evaluate a company's cash flow sustainability and its ability to meet financial obligations.
30
What are corporate actions?
refer to events initiated by a company that impact its stock price or ownership structure. can include stock splits, merges and acquisitions, spin-offs, share buybacks, and dividend declarations.
31
What are dividend analysis?
focuses on a company's dividend policy and history. includes information on dividend payouts, dividend yield, dividend growth, and dividend coverage ratios.
32
What is ESG data?
Environmental Social Governance data provides information on a company's sustainability practices, social impact, and governance structure. it allows users to assess a company's performance in non-financial areas and take them into investment decisions.
33
What are financial ratios?
quantitative indicators derived from a company's financial statements. help users evaluate a company's financial performance, profitability, liquidity, efficiency, and valuation.
34
What is an income statement?
it provides a summary of a company's revenues, expenses, and net income over a specific period. helps users evaluate a company's revenue generation, cost management, and overall profitability.
35
What is product/geographic segments?
a sub-product that focuses on analyzing a company's revenue breakdown by product lines or geographic regions. helps users assess revenue diversification, growth drivers, and potential risks associated with specific products or regions.
36
what is income?
the money you earn
37
what is expense?
the money you spend
38
what is profit?
when you earn more than you spend
39
what is loss?
when you spend more than you earn
40
what is stock?
a tiny peace of a company you can own
41
what is a shareholder?
a person who owns stocks
42
what is dividend?
the reward money a company gives to its shareholders from profits
43
what is a bond?
a fancy IOU - you lend money to a company or government and they pay you back later with interest
44
What does ETF stand for?
exchange-traded fund
45
What is ETF?
a basket of lots of different stocks or bonds you can buy all at once
46
What is a mutual fund?
similar to an ETF but usually run by a manager who picks the investments for you
47
what is bull market?
when stock prices are going up
48
what is bear market?
when stock prices are going down
49
what is volatility?
when prices bounce up and down alot
50
what is an index?
a scoreboard showing how a group of companies are doing
51
what is an example of an index?
s&p 500
52
what is revenue?
all the money a company makes from selling things
53
what is cost?
the money a company spends to make or sell things
54
what are assets?
what a company owns
55
what are examples of assets?
buildings, money, stuff
56
what are liabilities?
what a company owes
57
what are examples of liabilities?
loans, bills
58
what is equity?
the value of a company that belongs to its owners
59
how do we calculate equity?
assets - liabilities
60
what is market cap?
the total value of a company's shares
61
how do we calculate market cap?
price x number of shares
62
what does P/E ratio stand for?
price-to-earnings
63
What is P/E ratio?
tells you how expensive a stock is - higher means people expect more growth
64
what is volume?
how many shares were bought or sold in a day
65
what is diversification?
spreading out your investments
66
what is risk?
how likely you are to lose money
67
what is return?
how much money you make back from an investment
68
what is an economy?
the whole system of how people earn, spend, and trade money
69
what is GDP?
a country's report card - how much stuff and services it made in a year
70
what is inflation?
when prices go up and money buys less than before
71
what is deflation?
when prices go down
72
what is recession?
when the economy shrinks for a while - people buy less, jobs slow down
73
what is a depression?
a really long and deep recession
74
what is the federal reserve?
the u.s. money boss - controls how much money is out there and sets interest rates
75
what is interest rate?
how much it costs to borrow money
76
what is fiscal policy?
what the government does with taxes and spending
77
what is monetary policy?
what the fed does with money supply and interest rates
78
what does IPO stand for?
initial public offering
79
what is IPO?
when a company sells stock to the public for the first time
80
what is an earnings report?
a company's grade card showing how much money it made
81
what is liquidity?
how easy it is to turn something into cash
82
what is a trade deficit?
when a country buys more from other countries than it sells to them
83
what is a tarrif?
a tax on goods from other countries
84
what are capital gains?
money you make when you sell an investment for more than you bought it
85
what is impact investing?
investing money to make a difference
86
what are green bonds?
loans given to help eco-friendly projects
87
what are some environmental factors esg takes into account?
carbon footprint, sustainability, renewable energy, waste management, etc.
88
what are some social factors esg takes into account?
diversity & inclusion, labor practices, community engagement, etc.
89
What are some governance factors esg takes into account?
board of directors, ethics, corruption, etc.
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