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Strategy Intermediate: Value Investing

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1.
Value investing is about measuring a companys past performance, not forecasting its future profits.
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False. Value investing is about measuring a companys capacity and potential for growth.
2.
A value stock is issued by a company that _______.
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Has the resources to grow. A careful review reveals that it will likely grow in the future, even during economic downturns.
3.
A low price-to-book (P/B) ratio means _______.
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Less than 1. Mathematically, it means less than 1.
4.
To evaluate a company, a value investor might look at _______.
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Its book value. A value investor would focus on factors intrinsic to the company to determine its likely future performance.
5.
Which of the following is the least likely reason that a stock may be undervalued?
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Interest rates have fallen in the past year. Falling interest rates would make it easier for the company to borrow funds, grow, and increase earnings, which would likely result in an increase in the price of its stock.