Chapter 12, Problem 5PA

Summary Introduction

(a)

To determine:

Classification of stocks as per their market capitalization.

Introduction:

Market capitalization is the cumulative market value of the company’s stocks presently held by all of its investors expressed in monetary terms based on its present market value of one share.

Summary Introduction

(b)

To explain:

Classification of growth stock among these three stocks.

Introduction:

Growth stock is one which normally does not distribute dividend among shareholders rather it prefers to reinvest their net income in capital projects thus increasing the wealth of shareholders.

Summary Introduction

(c)

To explain:

Most appropriate stock for aggressive investor among these three.

Introduction:

Aggressive investor is one who invests in highly volatile and risky shares assuming a high degree of risk for earning a greater reward and maximizes their return.

Summary Introduction

(d)

To explain:

Most appropriate stock providing a combination of safety and earnings.

Introduction:

Safety and earnings

mean investing in share market with conservative approach where the investment is generally made in blue chip or large cap companies in order to reduce risk and earn regular income.