Choose wisely. There is only one correct answer to each question.
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1.
To evaluate a company, a value investor might look at _______.
Its book value. A value investor would focus on factors intrinsic to the company to determine its likely future performance.
2.
Value investors aim to assess a stock based on its historical performance in the market.
False. Value investors aim to assess a stock based on the companys strengths and prospects, independent of the stocks performance.
3.
A low price-to-book (P/B) ratio means _______.
Less than 1. Mathematically, it means less than 1.
4.
For value investors, which of the following would be the least helpful in evaluating a company?
Quarterly sales. A value investor usually focuses on factors that reveal the fundamental capacity and potential of the company over the long term.
5.
Which of the following is the least likely reason that a stock may be undervalued?
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.