Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
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.
2.
What does a company's price/sales ratio measure?
Its stock's market price divided by its sales per share. As such, it is a very useful ratio for businesses.
3.
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.
4.
How would you turn a price/earnings ratio into an earnings yield?
Invert it. Earnings yield can be gotten by inverting the price/earnings ratio.
5.
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.
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.
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%.
