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1.
Price/book ratio compares what with what?
A stock's market value with its book value. The 'price' part of the formula refers to the stock's market value.
2.
A company's gross margin is calculated by dividing _______.
Gross profits by revenues.
3.
If two companies both have the same level of revenue, but company A turns more of every sales dollar into profit than company B, which will probably have a higher price/sales ratio?
Company A. Company A is generating more earnings per dollar of sales than Company B. This means Company A needs fewer sales to generate the same level of earnings, and the market is likely to reward Company A with a higher P/S ratio.
4.
A company's market capitalization is calculated by _______.
Multiplying its stock price by the number of shares outstanding. For example, if there are a million shares of stock trading at $10 per share, the market capitalization is $10 million.
5.
Earnings per share (EPS) is a company's _______.
Net income divided by its number of shares outstanding. EPS uses net income.
6.
The price/cash flow ratio measures cash rather than paper profits.
True. For this reason, the ratio has a certain reliability that management likes.
7.
A company's dividend yield is calculated by _______.
Dividing annual dividend per share by stock price per share.
8.
A stock's price/earnings ratio is its price divided by its _______.
Earnings per share. The formula uses earnings per share.
