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1.
You should determine a company's valuation before buying its stock because doing so will help you see whether its stock is overpriced or underpriced
True. Valuation should be standard procedure for all investors. Buying an overpriced stock is ultimately not very profitable.
2.
Acme Company's shares trade at $15 and the firm has a total of 20 million shares outstanding. What is Acme's market capitalization?
$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.
3.
What are the two parts to the value of a business?
The current value of the business's assets and liabilities, and the value of the business's expected future profits. Investors take both into account when valuing a company.
4.
Stock valuation ratios compare a company's market value with what?
Any of the above. Valuation ratios compare market value with any of several figures about the company's finances.
5.
When valuing a business, which is easier to measure?
Actual assets and liabilities. These can be gleaned in current time from financial statements.
