Why stocks go up and down pdf download

Unfortunately, the word "secondary" in recent years has also come to be used to mean any primary offering of new shares other than the initial public offering.

With this improper use of "secondary" the correct answer to the question is True because this is really a primary offering. This is initially confusing, but is explained in Chapter 5.

Return to Quiz. An IPO can also be a secondary offering. That is, the shares being registered and sold to the public are unregistered shares which are currently owned by company founders, venture capitalists, and the like. An initial public offering simply means that some of the company's shares are being offered to the public for the first time.

It makes no difference whether these shares are primary new shares being created by the company , or secondary already outstanding shares which had not yet been registered.

The slower growing company might be a lot riskier. TRUE Companies which have high depreciation and low earnings, for example, may be better valued using a multiple of cash flow. See Chapter 19, but please read Chapters 14 and 16 first. See Chapter 6. But sometimes there is a psychological effect which results in the stock rising slightly at about the time of the split, or when the split is first announced.

See Chapter Therefore, changing to accelerated depreciation increases expenses, which lowers earnings. The increased depreciation expense will result in lower pretax profit, hence lower taxes, which will result in increased cash flow.

The difference between cash flow and earnings is a very important concept. Increasing expenses lowers pretax profit. Questions are easy once these terms and concepts are explained clearly. And you need to understand it if you want to discuss investments at a professional level.

FALSE Bonds are safer because they are secured by specific assets as well as the company's contractual commitment to pay interest and principal. Debentures are only backed by the latter. I can think of an exception. Can you? TRUE But when long term debt is much greater than equity, the company typically has a low interest coverage ratio, which implies risk.

See Chapter 4. TRUE The current yield is just the coupon annual interest payment divided by the current price of the bond. The yield-to-maturity also considers the coupon, but in addition, the yield-to-maturity adds the capital gain the bondholder will have if the bond is bought below par and held to maturity. If you want to understand the difference between coupon yield, current yield, and yield-to-maturity, read Chapter 9.

An increasing return on capital implies improving profitability. The company is most likely becoming less risky. Open navigation menu. Close suggestions Search Search. User Settings. Skip carousel. Carousel Previous. Carousel Next. What is Scribd? Why Stocks Go Up and Down. Uploaded by mchallis. Document Information click to expand document information Description: Michael Burry. Did you find this document useful? Is this content inappropriate? Report this Document. Description: Michael Burry. Flag for inappropriate content.

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