Question 1

Profits from investments within a NISA account are tax-free

Accepted Answer

Correct! NISA is a system where investment profits within the account are tax-exempt. Since capital gains and dividends that normally incur about 20% tax become tax-free, it is the first system beginners should utilize.

Question 2

iDeCo funds can be freely withdrawn at any time

Accepted Answer

Incorrect. iDeCo funds generally cannot be withdrawn until age 60. While it offers tax benefits such as full income deduction for contributions, the restriction of no withdrawals until 60 is the most important caveat.

Question 3

ETFs can be traded in real-time on stock exchanges

Accepted Answer

Correct! ETFs are listed on stock exchanges, so they can be traded in real-time just like stocks. While regular mutual funds trade once daily at the NAV, ETFs can be bought and sold anytime at market prices.

Question 4

An index fund is a mutual fund that aims to outperform the market average

Accepted Answer

Incorrect. An index fund aims to replicate the performance of a market index, not outperform it. Funds that aim to beat the market are called "active funds." Index funds are characterized by low-cost diversified investment across the entire market.

Question 5

Diversification guarantees no investment losses

Accepted Answer

Incorrect. Diversification is a method to reduce risk, but it cannot eliminate losses entirely. When the entire market declines, diversified portfolios also suffer losses. Diversification is "risk reduction," not "risk elimination."

Question 6

Margin trading allows trading up to about 3 times your own funds

Accepted Answer

Correct! Margin trading allows trading up to about 3.3 times the margin deposit. While this enables larger potential profits, losses are also magnified by the same ratio, making risk management crucial.

Question 7

Short selling is a method that profits when stock prices fall

Accepted Answer

Correct! Short selling involves borrowing shares and selling at a high price, then buying them back at a lower price to return. The difference between the selling and buying price becomes profit. However, there is risk of loss if the price rises.

Question 8

The basic trading unit in Japanese stock trading is 100 shares

Accepted Answer

Correct! In Japan, since October 2018, the trading unit for listed stocks has been unified to 100 shares. For example, to purchase a stock priced at 1,000 yen, you need at least 100,000 yen (1,000 yen x 100 shares).

Question 9

Shareholder benefits are offered by all listed companies

Accepted Answer

Incorrect. Shareholder benefits are voluntarily offered by companies and are not implemented by all listed companies. In recent years, more companies are abolishing shareholder benefits and consolidating into dividend payments.

Question 10

Unrealized gains are taxed even without selling

Accepted Answer

Incorrect. Unrealized gains only become taxable (capital gains tax) when shares are actually sold. As long as you hold the shares, the gains are "unrealized" and not subject to taxation.

Question 11

Capital gain refers to dividend income

Accepted Answer

Incorrect. Capital gain refers to profit from selling stocks (trading profit). Income from dividends is called "income gain." These two are paired concepts as the main sources of investment returns.

Question 12

Long-term investing is a method of holding without worrying about short-term price movements

Accepted Answer

Correct! Long-term investing involves holding stocks for several years or more, growing wealth through company growth and compound effects. Not reacting to short-term fluctuations is considered key to long-term investment success.

Question 13

Dollar-cost averaging buys more shares when prices are high

Accepted Answer

Incorrect. Dollar-cost averaging invests a fixed amount regularly, which means buying fewer shares when prices are high and more when prices are low. This naturally averages out the purchase cost.

Question 14

The compound interest effect grows larger with longer investment periods

Accepted Answer

Correct! Compound interest is the effect where "returns generate further returns," causing assets to grow like a snowball over time. The longer the period, the more dramatic the compounding effect becomes.

Question 15

Leverage amplifies not only profits but also losses

Accepted Answer

Correct! Leverage enables trading beyond your own capital, but both profits and losses are amplified according to the ratio. For example, with 3x leverage, both gains and losses are tripled.

Question 16

Using a specified account with tax withholding eliminates the need for tax filing

Accepted Answer

Correct! By choosing "with tax withholding" for a specified account, the brokerage automatically calculates and collects taxes, eliminating the need for tax filing. Most investors use this type of account.

Question 17

When purchasing mutual funds, you need to select individual stocks yourself

Accepted Answer

Incorrect. Mutual funds are financial products where professional fund managers handle stock selection and management. Investors do not need to choose individual stocks and can achieve diversification just by selecting a fund.

Question 18

A portfolio refers to the combination of financial assets you hold

Accepted Answer

Correct! A portfolio refers to the combination of financial assets you hold, such as stocks, bonds, and mutual funds. It is constructed considering risk-return balance, and the optimal combination varies by age and investment goals.

Question 19

A golden cross occurs when a short-term moving average crosses above a long-term moving average

Accepted Answer

Correct! A golden cross occurs when the short-term moving average crosses above the long-term one, considered a buy signal. It suggests a potential shift to an uptrend, but false signals can occur.

Question 20

A death cross is considered a buy signal

Accepted Answer

Incorrect. A death cross is a sell signal. It occurs when the short-term moving average crosses below the long-term one, suggesting a potential shift to a downtrend. The buy signal is the golden cross.

Question 21

Higher trading volume indicates greater market attention to that stock

Accepted Answer

Correct! Trading volume is the quantity of shares traded in a period, and higher volume indicates more attention to that stock. Analyzing price movements together with volume helps assess trend reliability.

Question 22

An RSI above 70 indicates an oversold condition

Accepted Answer

Incorrect. An RSI above 70 indicates "overbought" conditions. "Oversold" is when RSI falls below 30. RSI is displayed in a range of 0-100 and is an oscillator indicator used to time contrarian trades.

Question 23

Narrowing Bollinger Bands is considered a precursor to large price movements

Accepted Answer

Correct! A narrowing of Bollinger Bands is called a "squeeze," indicating stored market energy. Eventually, the bands expand ("expansion"), and large price movements tend to follow.

Question 24

A double top is a buy signal pattern that appears at market bottoms

Accepted Answer

Incorrect. A double top is a sell signal that appears at market tops. It is a pattern where the price rises to near the same high twice before declining. The buy signal at bottoms is the "double bottom."

Question 25

A double bottom is a chart pattern suggesting the end of a downtrend

Accepted Answer

Correct! A double bottom is a pattern where the price falls to near the same low twice before rising, considered a buy signal suggesting the end of a downtrend.

Question 26

A doji indicates a balance between buying and selling forces

Accepted Answer

Correct! A doji is a candlestick pattern where the open and close are nearly identical, indicating balance between buyers and sellers. It often appears at trend reversal points.

Question 27

A bullish candle indicates that the stock price has declined

Accepted Answer

Incorrect. A bullish candle indicates that the stock price has risen. It forms when the closing price is higher than the opening price. When the price declines, it forms a "bearish candle."

Question 28

Ichimoku Cloud was developed in the United States

Accepted Answer

Incorrect. Ichimoku Cloud was developed in Japan by newspaper writer Goichi Hosoda (pen name: Ichimoku Sanjin). It is a uniquely Japanese indicator composed of five lines and the distinctive "cloud."

Question 29

Gaps are always filled

Accepted Answer

Incorrect. While there is a market saying that "gaps get filled," this is a tendency, not an absolute rule. Particularly when strong trends develop, gaps may remain unfilled for extended periods.

Question 30

MACD is a technical indicator that uses the difference between two moving averages

Accepted Answer

Correct! MACD uses the difference between two Exponential Moving Averages (EMAs). Buy and sell timing is determined by crossovers of the MACD line and signal line, helping identify trend direction and strength.

Question 31

Breaking below a support line suggests further decline

Accepted Answer

Correct! A support line is a price level where a declining stock tends to bounce. Breaking below it means the lower support has been lost, suggesting further decline is expected.

Question 32

Sakata Five Methods is a candlestick analysis method attributed to the Edo period

Accepted Answer

Correct! The Sakata Five Methods are pattern analysis techniques attributed to Edo-period rice trader Munehisa Homma, consisting of five patterns. They are considered the origin of Japanese technical analysis.

Question 33

An engulfing pattern fits within the range of the previous candlestick

Accepted Answer

Incorrect. An engulfing pattern completely engulfs the previous candlestick. The pattern that fits within the previous candle is the "harami (inside bar)." These two are opposite patterns.

Question 34

When PBR falls below 1, theoretically it would be more profitable for shareholders to dissolve the company

Accepted Answer

Correct! A PBR below 1 means the stock price is below book value per share (BPS). Theoretically, dissolving the company and distributing assets would be more valuable for shareholders. However, book value and market value differ in practice.

Question 35

EPS is an indicator that shows the size of a company's debt

Accepted Answer

Incorrect. EPS (Earnings Per Share) shows profit per share, calculated by dividing net income by the number of outstanding shares. It measures earning power, not debt levels.

Question 36

Companies with ROE of 10% or more are generally considered efficiently managed

Accepted Answer

Correct! ROE shows how efficiently a company uses shareholders' equity to generate profits. 10% or above is a general benchmark. Japanese companies tend to have lower average ROE compared to Western companies.

Question 37

Dividend yield decreases when the stock price falls

Accepted Answer

Incorrect. Since Dividend Yield = Annual Dividend / Stock Price x 100, when dividends remain constant, a lower stock price results in a higher dividend yield. Conversely, a higher stock price means a lower yield.

Question 38

A dividend payout ratio of 100% poses no problem for growth investment

Accepted Answer

Incorrect. A 100% payout ratio means all net income is distributed as dividends, leaving zero funds for growth reinvestment. This can potentially lead to a decline in the company's long-term growth capacity.

Question 39

An equity ratio of 40% or more is generally considered financially healthy

Accepted Answer

Correct! The equity ratio is the proportion of equity to total assets, and 40% or above is generally considered healthy. A higher ratio indicates less dependence on borrowing and more stable management.

Question 40

Operating income is an indicator showing profit from core business activities

Accepted Answer

Correct! Operating income is calculated by subtracting cost of goods sold and SG&A expenses from revenue, showing the company's core business "earning power."

Question 41

Revenue is also called the "top line"

Accepted Answer

Correct! Revenue is called the "top line" because it appears at the top of the income statement. In contrast, the bottom profit (net income) appears at the bottom and is called the "bottom line."

Question 42

Net income is the profit before paying taxes

Accepted Answer

Incorrect. Net income is the final profit after subtracting all expenses including taxes from all revenues. Profit before taxes is called "pre-tax income." Net income is also known as the "bottom line."

Question 43

Free cash flow shows funds the company can freely use

Accepted Answer

Correct! Free cash flow is operating cash flow minus investment cash flow, representing funds freely available for dividend payments, debt repayment, share buybacks, and other purposes.

Question 44

A D/E ratio below 1 means equity exceeds interest-bearing debt

Accepted Answer

Correct! Since D/E Ratio = Interest-Bearing Debt / Equity, below 1 means equity is larger, indicating financial stability. However, the appropriate level varies by industry.

Question 45

The PEG ratio is an indicator that assesses valuation accounting for growth

Accepted Answer

Correct! The PEG ratio divides PER by earnings growth rate, enabling valuation assessment of growth companies that PER alone cannot evaluate. Below 1 is considered undervalued, above 2 overvalued.

Question 46

Earnings summary reports are published only once a year

Accepted Answer

Incorrect. Earnings summary reports are published quarterly (4 times a year). Reports are issued for Q1, Q2 (interim), Q3, and full-year results, with full-year announcements having the greatest impact on stock prices.

Question 47

Shikiho is a listed company data book published by Toyo Keizai

Accepted Answer

Correct! "Kaisha Shikiho" is a quarterly data book of listed companies published by Toyo Keizai. It features performance data and original assessments for all listed companies, serving as a bible for Japanese individual investors.

Question 48

Annual securities reports can be viewed for free by anyone on EDINET

Accepted Answer

Correct! Annual securities reports can be viewed for free by anyone on the Financial Services Agency's EDINET. They are important disclosure documents containing detailed financial and risk information.

Question 49

Share buybacks increase the number of outstanding shares

Accepted Answer

Incorrect. Share buybacks reduce outstanding shares as the company repurchases its own stock from the market. The reduction in shares improves EPS and ROE, which is a positive factor for stock price.

Question 50

Capital increases are always a positive factor for existing shareholders

Accepted Answer

Incorrect. Capital increases dilute the value per share as new shares are issued. They are often a short-term negative factor for stock prices, and generally disadvantageous for existing shareholders.

Question 51

Goodwill is the difference between the acquisition price and the acquired company's net assets in M&A

Accepted Answer

Correct! Goodwill is the portion of the acquisition price exceeding the acquired company's net assets, reflecting intangible values like brand power and technology. Goodwill impairment can lead to significant losses.

Question 52

Consolidated financial statements represent only the parent company's performance

Accepted Answer

Incorrect. Consolidated statements combine the parent company with subsidiaries and affiliates as a whole group. Standalone statements cover only the parent, but investors prioritize consolidated results for understanding the full picture.

Question 53

A company with positive operating cash flow has a healthy core business

Accepted Answer

Correct! Operating cash flow shows the actual cash flow from core business activities. A positive figure means the company is generating cash from its main business, indicating sound management.

Question 54

EBITDA is a suitable metric for international company comparisons

Accepted Answer

Correct! EBITDA excludes taxes, interest, and depreciation, eliminating the effects of differences in countries and accounting standards. Therefore, it is widely used for global comparisons of corporate earning power.

Question 55

PSR can be used to evaluate companies that are not yet profitable

Accepted Answer

Correct! PSR (Price-to-Sales Ratio) divides market cap by revenue, allowing evaluation of growth companies that are not yet profitable as long as they have revenue. It is important as an alternative when PER cannot be used.

Question 56

Impairment is an accounting treatment to increase profits

Accepted Answer

Incorrect. Impairment is a treatment that writes down an asset's book value to market value, recorded as an extraordinary loss. It significantly reduces profits rather than increasing them.

Question 57

Segment information refers to performance data broken down by business division

Accepted Answer

Correct! Segment information is performance data disclosed by dividing a company's businesses into divisions. It is essential for analyzing which businesses are growing and which have higher profitability.

Question 58

ROA is an indicator showing the return on total assets

Accepted Answer

Correct! ROA (Return on Assets) = Net Income / Total Assets x 100, showing how efficiently a company uses all its assets to generate profit. It is evaluated alongside ROE for management efficiency.

Question 59

A market order is an order method without specifying a price

Accepted Answer

Correct! A market order executes immediately at the current market price without specifying a price. Used when you want to ensure execution, but may execute at unexpected prices during rapid movements.

Question 60

Stop orders can be used for stop-loss (loss cutting)

Accepted Answer

Correct! Stop orders automatically trigger when a specified price is reached, making them ideal for stop-losses. For example, setting "sell if price drops to 900 yen" automatically limits your losses.

Question 61

The morning session at the Tokyo Stock Exchange runs from 9:00 to 12:00

Accepted Answer

Incorrect. The morning session runs from 9:00 to 11:30. The lunch break is from 11:30 to 12:30, and the afternoon session runs from 12:30 to 15:30. The afternoon closing was extended from 15:00 to 15:30 in November 2024.

Question 62

When a stock hits the daily price limit up, it cannot be traded at all until the next day

Accepted Answer

Incorrect. A daily limit up means the stock has reached the upper limit of the day's price range, but trading itself is still possible. If someone wants to sell at the limit price, a trade can occur, and trading resumes the next day with a new price range.

Question 63

The order book shows the prices and quantities of buy and sell orders

Accepted Answer

Correct! The order book displays the quantities of sell and buy orders at each price level. Reading the book helps you understand where orders are concentrated, providing reference for trading decisions.

Question 64

Stop-loss refers to selling to lock in profits

Accepted Answer

Incorrect. A stop-loss is selling to prevent further loss expansion when you have unrealized losses. Selling to lock in profits is called "profit-taking." Both are important investment decisions but have different meanings.

Knowledge Check

All Quizzes