Help
Course Catalog > Stocks > 100
Stocks 108: Learn the Lingo--Basic Ratios

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Price/book ratio compares what with what?
Choose wisely. There is only one correct answer.
A stock's market value with its book value. The 'price' part of the formula refers to the stock's market value.
2.
The three types of a business's profit margins are gross margin, net margin, and _______.
Choose wisely. There is only one correct answer.
Operating margin.
3.
Earnings per share (EPS) is a metric that should not be used in isolation.
Choose wisely. There is only one correct answer.
True. As with other financial ratios, you should use EPS along with other metrics.
4.
An advantage to using the price/sales ratio over the price/earnings ratio is that sales are harder to manipulate than earnings.
Choose wisely. There is only one correct answer.
True. Sales are more straightforward. Also, there are fewer accounting estimates involved than with earnings.
5.
A company's dividend yield is calculated by _______.
Choose wisely. There is only one correct answer.
Dividing annual dividend per share by stock price per share.
6.
A stock's price/cash flow ratio is calculated by dividing the stock price by the total operating cash flow.
Choose wisely. There is only one correct answer.
False. The ratio uses operating cash flow per share, not total operating cash flow.
7.
A stock's price/earnings ratio is its price divided by its _______.
Choose wisely. There is only one correct answer.
Earnings per share. The formula uses earnings per share.
8.
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.
$20. Market cap is stock price multiplied by number of shares outstanding.