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1.
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.
2.
Price/book ratio compares what with what?
A stock's market value with its book value. The 'price' part of the formula refers to the stock's market value.
3.
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.
4.
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.
5.
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.
6.
A stock's price/earnings ratio is its price divided by its _______.
Earnings per share. The formula uses earnings per share.
7.
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.
8.
The three types of a business's profit margins are gross margin, net margin, and operating margin.
