Strategy Intermediate: Value Investing

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1.
Value investors aim to assess a stock based on its historical performance in the market.
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False. Value investors aim to assess a stock based on the companys strengths and prospects, independent of the stocks performance.
2.
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.
3.
A low price-to-book (P/B) ratio means _______.
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Less than 1. Mathematically, it means less than 1.
4.
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.
5.
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.