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1.
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.
2.
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%.
3.
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.
4.
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.
5.
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.
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.
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.
