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1.
A company's price/sales ratio is its stock price divided by _______.
Sales per share. Since we are using stock price, we must also use sales per share.
2.
Companies in which of the following industries would likely have the lowest price/book ratios?
Utilities. The lowest price/book ratios are found in capital-intensive industries, such as utilities.
3.
The three types of a business's profit margins are gross margin, net margin, and operating margin.
True.
4.
Earnings per share (EPS) is a metric that should not be used in isolation.
True. As with other financial ratios, you should use EPS along with other metrics.
5.
A stock's price/cash flow ratio is calculated by dividing the stock price by the total operating cash flow.
False. The ratio uses operating cash flow per share, not total operating cash flow.
6.
A company's dividend yield is calculated by _______.
Dividing annual dividend per share by stock price per share.
7.
A stock's price/earnings ratio is its price divided by its _______.
Earnings per share. The formula uses earnings per share.
8.
A company's market capitalization is calculated by _______.
Multiplying its stock price by the number of shares outstanding. For example, if there are a million shares of stock trading at $10 per share, the market capitalization is $10 million.