Analysis Beginner: Tools and Tips to Evaluate Investments

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1.
A company's book value is _______.
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The value of its assets minus liabilites. Book value is the value of a company's assets.
2.
Asset utilization ratios are used to _______.
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Determine how a company manages its assets. Ultimately, asset utilization ratios help to measure a company's efficiency.
3.
Which of the following is not included in a company's statement of cash flow?
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Managing activities. The statement of cash flow does not include this.
4.
Investors who want high returns on investment may want stocks with _______ betas.
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High. The higher the beta, the higher the possible returns.
5.
If a stock's market price at the moment is $100 per share, and its net earnings for the past 12 months are $5 per share, what is the stock's price/earnings ratio?
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$20. Divide market price ($100) by net earnings ($5) to get the price/earnings ratio (20).
6.
Poor dividend payment on a company's part indicates that it will perform poorly in the future.
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False. In many cases, companies reinvest their earnings to finance future growth. Such companies may actually do quite well in the future.
7.
Profit margin is a widely used measure in business. It measures earnings compared to _______.
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Sales. Profit margin compares earnings to sales, where the earnings are either before taxes or after.