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Stocks 401: Understanding Value

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1.
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.
2.
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.
3.
Stock valuation ratios compare a company's market value with what?
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Any of the above. Valuation ratios compare market value with any of several figures about the company's finances.
4.
When valuing a business, which is easier to measure?
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Actual assets and liabilities. These can be gleaned in current time from financial statements.
5.
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.