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1.
A company's dividend yield is calculated by _______.
Dividing annual dividend per share by stock price per share.
2.
A stock's price/cash flow ratio is calculated by dividing the stock price by the total operating cash flow.
False. The ratio uses operating cash flow per share, not total operating cash flow.
3.
A company's gross margin is calculated by dividing _______.
Gross profits by revenues.
4.
Companies in which of the following industries would likely have the lowest price/book ratios?
Utilities. The lowest price/book ratios are found in capital-intensive industries, such as utilities.
5.
Imagine that your company has 20 million shares of stock outstanding, the stock is currently trading at $10 per share, the price/earnings ratio is 20, and your sales this year are $5 million. As the chief financial officer, you must calculate your company's market capitalization. What is it?
$200 million. Market cap is stock price multiplied by number of shares outstanding, so the figure is $200 million. Price/earnings ratio and sales do not factor into market cap.
6.
A company's price/sales ratio is its stock price divided by _______.
Sales per share. Since we are using stock price, we must also use sales per share.
7.
Earnings per share (EPS) is a company's _______.
Net income divided by its number of shares outstanding. EPS uses net income.
8.
If a company's P/E is 30, its earnings yield is _______.
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%.
