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1.
An advantage to using the price/sales ratio is that sales are cut-and-dried.
True. Sales are more straightforward and harder to manipulate than earnings.
2.
Why should you be wary of using the cash return measurement for evaluating foreign companies?
They may have different definitions of cash flow. In other words, what they call cash flow and what we call cash flow may be two different things, thus skewing the usefulness of the measurement.
3.
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.
4.
If a stock has a price/earnings ratio of 20, based on a price of $100 and an earnings per share of $5, its earnings yield is _______.
5%. Earnings yield can be gotten by inverting the price/earnings ratio.
5.
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.
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.
In a typical price/book ratio, what exactly is the book value part of it?
The total equity divided by the number of shares outstanding. Altogether, this is the "book value" that purports to show what a share of stock is objectively worth.
