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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.
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.
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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?
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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 _______.
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Gross profits by revenues.
5.
The price/cash flow ratio measures cash rather than paper profits.
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True. For this reason, the ratio has a certain reliability that management likes.
6.
A company's dividend yield is calculated by _______.
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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?
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$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 _______.
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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%.