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1.
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?
$20. Market cap is stock price multiplied by number of shares outstanding.
2.
A company's gross margin is calculated by dividing _______.
Gross profits by revenues.
3.
The price/cash flow ratio measures cash rather than paper profits.
True. For this reason, the ratio has a certain reliability that management likes.
4.
A stock's price/earnings ratio is its price divided by its _______.
Earnings per share. The formula uses earnings per share.
5.
Earnings per share (EPS) is a company's _______.
Net income divided by its number of shares outstanding. EPS uses net income.
6.
Companies in which of the following industries would likely have the highest price/book ratios?
Pharmaceuticals. The highest P/B ratios are in fields such as pharmaceuticals and consumer products, where intangibles are more important.
7.
An advantage to using the price/sales ratio over the price/earnings ratio is that sales are harder to manipulate than earnings.
True. Sales are more straightforward. Also, there are fewer accounting estimates involved than with earnings.
8.
All else equal, what does a rising dividend yield mean for a stock?
The stock is becoming less expensive. A rising dividend yield means that the stock is becoming less expensive because a higher percentage of the stock price is being paid out in annual dividends.
