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Stocks 401: Understanding Value

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1.
After finding a great business, determining the company's valuation is _______.
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Fundamental. Valuing a stock is a fundamental component of the investing process. Even the greatest company in the world might not be an attractive investment if the stock is priced too high.
2.
Which of the following would not be part of a business's assets and liabilities?
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Future cash flow. Future cash flow is not a part of assets and liabilities; it is the value of future expected profits.
3.
What form of capital does market capitalization not include?
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Debt. Because of this limitation, some investors turn to enterprise value, which does include debt, among other factors.
4.
Which stock valuation approach is more straightforward?
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Intrinsic value. Intrinsic value does not require much context to understand, as the ratio-based approaches do.
5.
Acme Company's shares trade at $15 and the firm has a total of 20 million shares outstanding. What is Acme's market capitalization?
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$300 million. Acme's market capitalization is $300 million. Recall that market capitalization is calculated by multiplying a company's share price by its number of shares outstanding.