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1.
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.
2.
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.
3.
The formula for cash return is free cash flow plus net interest expense, the sum of which is then divided by _______.
Enterprise value. Enterprise value is the figure that goes into the denominator.
4.
Company Z pays an annual dividend of $2.00 per share, and its stock trades for $25. What is its dividend yield?
8%. The dividend yield is found by dividing annual dividend per share by stock price per share. Therefore, 2/25 equals 8%.
5.
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.
6.
The value of a stock's price/earnings ratio could be described as _______.
How much you are willing to pay for the company's earnings. This is what P/E boils down to, practically speaking. The higher the P/E ratio, the more that you are generally willing to pay for the earnings that the company generates.
7.
A company's price/earnings growth ratio uses _______.
Future estimates. The price/earnings growth ratio is used to get a sense of what a company will be like in the future.
