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🏛️ 25 questions · answers and explanations · free

Stock market quiz

25 free stock market questions with answers and explanations: why prices move, bid, ask and spread, market vs limit orders, exchanges and pink sheets, dividends, the income statement, balance sheet, cash flow, P/E ratios and moats.

Tap an answer to check it, or open "Show the answer" under each question. Every question comes from a free 3-minute lesson, linked under its answer. Educational content, not financial advice.

Question 1 of 25

Why did GameStop spike from $4 to $483?

  1. Record profits — earnings boomed
  2. A hit new product — sales soared
  3. A bailout — the feds stepped in
  4. A buying frenzy — demand exploded
Show the answer

Answer: D · A buying frenzy — demand exploded

A wave of buyers (many from Reddit) flooded in. Demand massively outpaced sellers — pure supply and demand, not business performance.

📚 Learn it: Why Do Stock Prices Move?

Question 2 of 25

Which stock has the TIGHTEST spread?

  1. Apple (AAPL)
  2. Any penny stock
  3. An OTC stock
  4. A Pink Sheet
Show the answer

Answer: A · Apple (AAPL)

Apple is one of the most liquid stocks on earth — millions of shares trade daily, so the bid-ask gap is tiny.

📚 Learn it: The Bid, The Ask & The Spread

Question 3 of 25

What does fundamental analysis focus on?

  1. Market mood — headlines, social buzz, analyst hype
  2. Trading data — volume, volatility, short interest
  3. Price charts — patterns, trends, support, momentum
  4. The actual business — revenue, profits, debt, growth
Show the answer

Answer: D · The actual business — revenue, profits, debt, growth

Fundamentals study the underlying company's health and value, not the price chart.

📚 Learn it: What Is Fundamental Analysis?

Question 4 of 25

Strictest exchange requirements?

  1. NYSE American
  2. NYSE
  3. Pink Sheets
  4. OTC
Show the answer

Answer: B · NYSE

NYSE (like Nasdaq's top tier) has strict listing requirements — companies must meet high financial and reporting standards.

📚 Learn it: NYSE, NASDAQ, OTC & Pink Sheets

Question 5 of 25

What's the 'bottom line' on an income statement?

  1. Cash on hand — the money still left in the bank
  2. Net income — the actual profit after costs
  3. Total revenue — all the sales the company made
  4. Gross profit — sales minus the cost of goods
Show the answer

Answer: B · Net income — the actual profit after costs

Net income is what's left after all costs — the real profit.

📚 Learn it: The Income Statement: Is It Making Money?

Question 6 of 25US

Most dividends paid how often?

  1. Semiannually
  2. Annually
  3. Monthly
  4. Quarterly
Show the answer

Answer: D · Quarterly

Most US companies pay dividends quarterly — four times per year.

📚 Learn it: Dividends — Getting Paid to Hold

Question 7 of 25

The balance sheet equation is...

  1. Assets = Revenue − Liabilities
  2. Assets = Liabilities + Equity
  3. Revenue − Expenses = Net Income
  4. Equity = Assets + Debts
Show the answer

Answer: B · Assets = Liabilities + Equity

What a company owns equals what it owes plus the shareholders' leftover equity.

📚 Learn it: The Balance Sheet: Owns vs Owes

Question 8 of 25

Why can the cash flow statement be more honest than profit?

  1. Profit involves accounting estimates; cash actually moved or it didn't
  2. Profit leaves out taxes and interest; cash flow includes every single cost
  3. Cash flow is audited by the SEC, while profit is reported by the company
  4. Cash flow is always the larger number, so it shows the full picture
Show the answer

Answer: A · Profit involves accounting estimates; cash actually moved or it didn't

Earnings can be shaped by accounting choices; cash flow tracks money that genuinely came in or went out.

📚 Learn it: Cash Flow: The Lie Detector

Question 9 of 25

What does a P/E ratio of 20 mean?

  1. The share price is $20 higher than its yearly earnings
  2. You're paying $1 for every $20 of annual earnings
  3. You're paying $20 for each $1 of annual earnings
  4. The company's earnings grew 20% over the last year
Show the answer

Answer: C · You're paying $20 for each $1 of annual earnings

P/E is price per dollar of profit — here, $20 paid for $1 of yearly earnings.

📚 Learn it: The P/E Ratio & Valuation

Question 10 of 25

What is an economic 'moat'?

  1. A durable competitive advantage that protects its profits
  2. A temporary lead from a hot product rivals will copy
  3. A high stock price that makes takeovers too expensive
  4. A large cash reserve that protects it during a downturn
Show the answer

Answer: A · A durable competitive advantage that protects its profits

It's a lasting edge — like a castle's moat — that keeps competitors from eroding profits.

📚 Learn it: Moats: Why Some Companies Win for Decades

Learn it in the app: Stocks & Equities lessons, free →

3-minute lessons with a quiz, XP and streaks in the free app. No sign-up needed.

Question 11 of 25

What does a dividend yield of 3% mean?

  1. The share price went up 3% because of the dividend
  2. You pay a 3% fee each year to receive the dividends
  3. You receive $3 a month in dividends per $100 invested
  4. You receive $3 a year in dividends per $100 invested
Show the answer

Answer: D · You receive $3 a year in dividends per $100 invested

Yield is the annual dividend as a percent of the share price — $3 per $100 here.

📚 Learn it: Dividends & Shareholder Returns

Question 12 of 25

What's the smart way to use fundamental analysis?

  1. Run a checklist of the right questions (growth, profit, debt, cash, price, moat)
  2. Check the chart first (trend, volume, momentum), then confirm with the latest news
  3. Memorize every number in the annual SEC filings so you can compare them line by line
  4. Focus on one key number (usually the P/E) and buy when it's below 15
Show the answer

Answer: A · Run a checklist of the right questions (growth, profit, debt, cash, price, moat)

It's about asking the right questions quickly, not memorizing every number.

📚 Learn it: The 5-Minute Stock Checkup

Question 13 of 25

Peter Lynch's main investment strategy?

  1. Hunting penny stocks to flip
  2. Following what Wall Street analysts buy
  3. Watching what people actually buy
  4. Using complex models to predict prices
Show the answer

Answer: C · Watching what people actually buy

He famously said 'invest in what you know.' Walked through malls. Asked his kids. Noticed what brands dominated. The boring observation strategy beat Wall Street geniuses.

📚 Learn it: Peter Lynch's $14 Billion Secret

Question 14 of 25

What's a 'margin of safety'?

  1. Keeping an emergency fund of 3-6 months' expenses, so you never have to sell stocks
  2. Setting a stop-loss below your buy price, so losses get cut automatically
  3. Buying on margin with extra cash in the account, so you avoid a margin call
  4. Buying a stock at a discount to its real value, so you have room to be wrong
Show the answer

Answer: D · Buying a stock at a discount to its real value, so you have room to be wrong

Margin of safety means you buy with enough discount that even if you're wrong about the value, you don't lose money.

📚 Learn it: Benjamin Graham — The Father of Value

Question 15 of 25

Place a MARKET order to buy right now and you pay the...

  1. Yesterday's close
  2. Ask
  3. Bid
  4. Whatever price you choose
Show the answer

Answer: B · Ask

A market order crosses the spread immediately — you buy at the ask. To buy at your own price instead, use a limit order.

📚 Learn it: The Bid, The Ask & The Spread

Question 16 of 25

The core question in fundamental analysis is...

  1. Is the share price low enough for you to buy plenty of shares?
  2. How does the price compare to the business's true value?
  3. Is the stock price trending higher than it was last month?
  4. How many analysts and influencers are recommending the stock?
Show the answer

Answer: B · How does the price compare to the business's true value?

You compare what the market charges (price) to what the business is worth (value).

📚 Learn it: What Is Fundamental Analysis?

Question 17 of 25

What does EPS (earnings per share) tell you?

  1. The dividend each shareholder gets per year
  2. Profit divided per share of the company
  3. How far the share price rose this year
  4. Revenue divided per share of the company
Show the answer

Answer: B · Profit divided per share of the company

EPS is net income split across all shares — profit per slice.

📚 Learn it: The Income Statement: Is It Making Money?

Question 18 of 25

Why does a company's debt load matter so much?

  1. Heavy debt shows banks trust it, which signals strength
  2. Debt levels set how big the dividend has to be
  3. Heavy debt makes a company fragile in a downturn
  4. It doesn't, as long as revenue keeps growing each year
Show the answer

Answer: C · Heavy debt makes a company fragile in a downturn

A company buried in debt can collapse in a bad year; low debt + cash means resilience.

📚 Learn it: The Balance Sheet: Owns vs Owes

Question 19 of 25

Which cash-flow bucket matters most for the core business?

  1. Investing cash flow
  2. Financing cash flow
  3. Operating cash flow
  4. None of them
Show the answer

Answer: C · Operating cash flow

Operating cash flow is the cash generated by the actual business — the heart of it.

📚 Learn it: Cash Flow: The Lie Detector

Question 20 of 25

Why is a share price alone useless for 'cheap vs expensive'?

  1. You must compare it to other stocks' prices (peers)
  2. You must compare it to last year's price (trend)
  3. You must compare it to the profit you get (earnings)
  4. You must compare it to how many shares you can buy
Show the answer

Answer: C · You must compare it to the profit you get (earnings)

A high or low price means nothing until you know the earnings behind it — that's what P/E captures.

📚 Learn it: The P/E Ratio & Valuation

Question 21 of 25

Which is an example of a 'network effect' moat?

  1. A brand so famous that people pay more just for the name
  2. A factory that makes goods cheaper than any rival can
  3. A platform that gets more valuable as more people join
  4. A patent that blocks competitors from copying the product
Show the answer

Answer: C · A platform that gets more valuable as more people join

Network effects mean each new user makes the product more valuable — hard for rivals to overcome.

📚 Learn it: Moats: Why Some Companies Win for Decades

Question 22 of 25

Why can an unusually HIGH dividend yield be a warning?

  1. The IRS taxes yields over 8% at a much higher rate, shrinking your payout
  2. It may signal the price is about to jump as buyers rush in for the payout
  3. It means the company earns so much that it can't reinvest it all in growth
  4. The price may have crashed on trouble, and the dividend could be cut
Show the answer

Answer: D · The price may have crashed on trouble, and the dividend could be cut

A spiking yield often reflects a falling price on bad news — and an unsustainable payout that may get slashed.

📚 Learn it: Dividends & Shareholder Returns

Question 23 of 25

A stock is growing but has negative net income, huge debt, and negative free cash flow. You should...

  1. Be very cautious — multiple red flags outweigh the growth
  2. Wait for a dip — red flags matter less at a lower price
  3. Buy now — growth matters most, and profits will follow
  4. Buy a little — the debt is fine as long as sales keep rising
Show the answer

Answer: A · Be very cautious — multiple red flags outweigh the growth

Several red boxes (profit, debt, cash) outweigh a single green one — that's a fragile business.

📚 Learn it: The 5-Minute Stock Checkup

Question 24 of 25

Your teenage daughter constantly buys clothes from one brand. Her friends do too. Stores are packed. What might this mean?

  1. Avoid it — popular brands are overpriced
  2. Worth looking at as an investment
  3. Put your savings into it today
  4. Nothing — fads don't move stocks
Show the answer

Answer: B · Worth looking at as an investment

Could be a Peter Lynch signal. Look up the stock. Read their financials. Strong consumer demand often precedes stock gains. Lululemon (LULU) caught early would have made you 10x+.

📚 Learn it: Peter Lynch's $14 Billion Secret

Question 25 of 25

You want to buy BELOW the current ask. What do you do?

  1. Sell your shares first, then buy lower
  2. Place a market order and wait for it to fill lower
  3. Place a limit order at your price and wait
  4. You can't — buyers always have to pay the ask
Show the answer

Answer: C · Place a limit order at your price and wait

A limit order lets you BECOME the bid at your chosen price and wait for a seller to meet you — no need to cross the spread.

📚 Learn it: The Bid, The Ask & The Spread

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