Canadian Securities Course (CSC) Level 1 Practice Exam

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What is the company's float?

  1. The total value of a company's assets

  2. The remaining shares after a buyback

  3. The number of outstanding shares available for public trading

  4. The difference between market and book value

The correct answer is: The number of outstanding shares available for public trading

The float of a company refers specifically to the number of shares that are available for public trading. This metric is important because it indicates the liquidity of a stock and provides insight into how easily investors can buy or sell shares in the market. The float excludes shares that are held by insiders, employees, or other strategic stakeholders as those shares are not freely available for public investment. Understanding the float helps investors assess the volatility of a stock; a company with a small float may experience larger price swings due to changes in demand. This context highlights the significance of option C, as it directly addresses the quantity of shares that contribute to the trading volume in the market. Other options do not accurately represent what the float means: the total value of a company's assets pertains to its balance sheet, remaining shares after a buyback focus on corporate actions, and the difference between market and book value relates to valuation rather than the shares available for trading.

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