Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
When a company that normally pays regular dividends decides to cut its dividend payments, that is _______.
Usually a bad sign. Companies that pay regular dividends tend to be relatively stable. If a company cuts its dividend, that is probably a bad sign. Exactly how bad, or for how long, may be difficult to tell in the near term.
2.
If a stock no longer meets one of your investment criteria, what should you do?
Place it on a "watch" list. Just because an investment no longer meets one of your criteria is no reason to sell it. Put it on your "to watch" list instead. But if a stock no longer clears most of your hurdles, it is a sell candidate.
3.
If the price of one of your stocks falls, you should buy more of it right away. Correct?
Maybe, maybe not. First, find out why it fell. The fall may be due to deterioration of the company, for example. Or it may actually be a welcome correction.
4.
If one of your companies misses its quarterly earnings estimate, you should investigate why instead of selling it right away. Correct?
Yes. Companies miss quarterly earnings estimates all the time without imploding. It's best to find out why it happened, as there may be a good explanation. But if it misses them several quarters in a row, it may be time to get out.
5.
If the price/earnings ratio of one of your stocks shrinks significantly, what should you do?
Figure out why the price/earnings ratio fell. If the company is still financially sound, a shrinking price/earnings ratio can be a buying opportunity. If the company's fundamentals are deteriorating, though, you may no longer want to own the stock. You need to determine why the multiple is falling before you do anything else.
