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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 company's market capitalization is calculated by _______.
Multiplying its stock price by the number of shares outstanding. For example, if there are a million shares of stock trading at $10 per share, the market capitalization is $10 million.
3.
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.
4.
The three types of a business's profit margins are gross margin, net margin, and _______.
Operating margin.
5.
Earnings per share (EPS) is a company's net income divided by its number of shares outstanding.
True. As such, EPS can give you a quick idea of a company's profitability, though it has its limits.
6.
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.
7.
If a company has earned $1.50 per share and its share price is $30, what is its P/E?
20. The P/E is determined by dividing the price per share ($30) by the earnings per share ($1.50), yielding a P/E of 20 in this case.
8.
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.
