Choose wisely. There is only one correct answer to each question.
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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 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.
3.
The price of one of your stocks shoots up. What should you do?
Determine why the stock is behaving the way that it's behaving. If the stock still meets your investment criteria, you'll want to hold on to it.
4.
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.
5.
The most relevant tool that will help you develop your criteria for investing is _______.
An investment policy statement. Though you will glean some important information from the other choices, an investment policy statement will lay down the criteria that will guide how you select and maintain your investments.
