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100
Stocks 108:
Learn the Lingo--Basic Ratios
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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1.
A company's price/sales ratio is its stock price divided by _______.
Choose wisely. There is only one correct answer.
Total sales
Sales per share
Net sales
Sales per share. Since we are using stock price, we must also use sales per share.
2.
Earnings per share (EPS) is a metric that should not be used in isolation.
Choose wisely. There is only one correct answer.
True
False
True. As with other financial ratios, you should use EPS along with other metrics.
3.
Companies in which of the following industries would likely have the highest price/book ratios?
Choose wisely. There is only one correct answer.
Utilities
Pharmaceuticals
Retail
None of the above
Pharmaceuticals. The highest P/B ratios are in fields such as pharmaceuticals and consumer products, where intangibles are more important.
4.
A company's gross margin is calculated by dividing _______.
Choose wisely. There is only one correct answer.
Gross profits by revenues
Sales by gross profits
Prices by revenues
Gross profits by revenues.
5.
The price/cash flow ratio measures cash rather than paper profits.
Choose wisely. There is only one correct answer.
True
False
True. For this reason, the ratio has a certain reliability that management likes.
6.
A company's dividend yield is calculated by _______.
Choose wisely. There is only one correct answer.
Dividing annual dividend per share by stock price
Dividing annual dividend per share by stock price per share
Dividing annual dividend by stock price per share
Any of the above
Dividing annual dividend per share by stock price per share.
7.
If a company's market capitalization is $100 million and there are 5 million shares of stock outstanding, what is the stock price right now?
Choose wisely. There is only one correct answer.
$5
$20
$100
The stock price cannot be determined.
$20. Market cap is stock price multiplied by number of shares outstanding.
8.
If a company's P/E is 30, its earnings yield is _______.
Choose wisely. There is only one correct answer.
3.0%
3.3%
30 times the company's earnings
3.3%. The earnings yield is calculated by inverting the P/E ratio. In this case the earnings yield is 1/30 or 3.3%.
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