Analysis Beginner: Tools and Tips to Evaluate Investments

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which of the following is not included in a company's statement of cash flow?
Choose wisely. There is only one correct answer.
Managing activities. The statement of cash flow does not include this.
2.
A low price-to-book (P/B) ratio means _______.
Choose wisely. There is only one correct answer.
Less than 1. Mathematically, it means less than 1.
3.
Fixed asset turnover measures _______.
Choose wisely. There is only one correct answer.
The amount of sales a company generates from its fixed assets. It is used as a measure of sales success.
4.
Investors who want high returns on investment may want stocks with _______ betas.
Choose wisely. There is only one correct answer.
High. The higher the beta, the higher the possible returns.
5.
Poor dividend payment on a company's part indicates that it will perform poorly in the future.
Choose wisely. There is only one correct answer.
False. In many cases, companies reinvest their earnings to finance future growth. Such companies may actually do quite well in the future.
6.
Low earnings can make a price/earnings ratio very high. This fact may not mean that the company is overvalued. Instead, there may simply be an industrywide ________.
Choose wisely. There is only one correct answer.
Recession. A recession may lower earnings.
7.
If Wilma's Widgets, Inc., earns $5 million after taxes and makes $10 million in sales, what is its net profit margin?
Choose wisely. There is only one correct answer.
50 percent. Net profit margin is earnings after taxes divided by sales. In the case of Wilma's Widgets, Inc., that amounts to 0.5, or 50 percent.