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1.
A stock with a high dividend yield is a good bargain for an income investor to buy.
Maybe. A dividend yield can be high for many reasons, either good or bad. On the bad side, the stock price might be dropping deeply due to financial troubles; that could proportionately raise the dividend yield. Caution is always key.
2.
A price/earnings ratio that uses future earnings estimates to calculate the ratio is normally called _______.
A forward price/earnings ratio. As opposed to a trailing price/earnings ratio, which looks at past earnings, the forward one uses estimates of future earnings.
3.
One advantage of earnings yields over price/earnings ratios is that we can use them to compare investments in other classes.
True. This way, we can compare the returns that the different types of investments offer.
4.
In a price/book ratio, what exactly is the "price" part of it?
The stock's market price. The price is the market price, while the "book" part is the book value of a share.
5.
A company has an enterprise value of $225 million, free cash flow of $15 million, and zero net interest expense. What is its cash return?
6.7%. Cash return is equal to free cash flow divided by enterprise value. In this case, that's $15 million/$225 million, or 6.7%.
6.
In a nutshell, the price/earnings growth ratio of a company provides a quick and easy way to estimate the price you're paying for _______.
Its future growth. This is because the ratio uses future estimates. Many investors want to know what a company's prospects will be.
7.
A firm's price/sales ratio is found by dividing its stock price by its _______.
Sales per share. Since we are using stock price, we must also use sales per share.
