D14

Which of the following typically is true for profitability ratios? a. Growth stocks have lower price to earnings ratios.b. Companies in more competitive industries have higher profit margins.c. The gross profit ratio declines as competition increases.d. When a company has debt, its return on equity will be lower than its return on assets.

Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R).  And what are the assumptions and the limitations of this model? Is it the PEG ratio or not??

TRUE OR FALSE Price earnings ratio refers to the multiplier applied to earnings per share to determine current value of common stock.

The PE ratio a. Measures a company’s profitability per share.b. Tends to be higher for value stocks.c. Tends to be higher for growth stocks.d. Typically is less than 1.

It is possible for the postmerger P/E ratio to move in a direction opposite to that of the immediate postmerger earnings per share. Explain why this could happen.

Solve

Do the Market-value ratios relate a firm's stock price to its earnings and book value per share? How?

Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R).  And what are the assumptions and the limitations of this model? What can be said about the dividend growth model? Similarly what can be said about the capital asset pricing model?

Which of the following is the best reason why the price-earnings method is often used by investors to estimate the fair price of a stock? a) Because the earning multiples are easily found in online financial databases. b) Earnings per share is a known amount that is related to the payment of future dividends. c) Because the price-earnings method gives the same answer as the constant growth method and is easier to compute. d) The price-earnings method has been shown to provide the most accurate price estimate.

Which of the following ratios would analysts use to value stocks? Select one: a. All of the above b. Price per Earnings c. Price per sales d. Price per cash flow

The stock market valuation/capitalization of a company in the NY Stock Exchange is based on the   a. Expected company taxes   b. Expected profitability of the company     c. Expected yield curve   d. None of the above

According to the weak-form efficient market hypothesis, which of the following types of information are fully reflected in stock prices?   Group of answer choices   insider information earnings announcements and rates of return dividend and earnings announcements rates of return, trading volume, and news about the economy past price and volume data

Earnings per share is a factor used by the stock market to determine stock prices. Select one: True False

Using the information in the following chart, and PE Multiples, what is the per-share intrinsic value of Firm A's equity? That is, calculate the estimated per-share intrinsic value of Firm A's equity using the price-to-earnings (P/E) multiples below. Note: You should form (separate value estimates using the average price-to-book ratio and average price-to-earnings ratio for three comparables (Firms B, C and D) Book Value of Share Price (5) Shares Outstanding Common Equity (5) Earnings Per Share (EPS) (5) 2,000,000 20,000,000 8.00 Firm A 100.00 Firm B 200.00 3,000,000 50,000,000 14.00 Firm C 400.00 6,000,000 160,000,000 30.00 Firm D 800.00 12,000,000 880,000,000 60.00 A $100 B $126.36 C) $142.90 $109.21

Price-earnings ratio is computed by dividing annual dividends by average market value per share.   True or False?

When is potentially dilutive security​ anti-dilutive? A. The definition of diluted earnings per share requires that diluted earnings per share reflect the​ best-case scenario or maximum potential decrease in EPS. So if security decreases the earnings per share​ ratio, it​ is, by​ definition, anti-dilutive. B. The definition of diluted earnings per share requires that diluted earnings per share reflect the​ worst-case scenario or maximum potential decrease in EPS. So if security increases the earnings per share​ ratio, it​ is, by​ definition, anti-dilutive. C. The definition of diluted earnings per share requires that diluted earnings per share reflect the​ best-case scenario or maximum potential increase in EPS. So if security decreases the earnings per share​ ratio, it​ is, by​ definition, anti-dilutive. D. The definition of diluted earnings per share requires that diluted earnings per share reflect the​ worst-case scenario or maximum potential increase in EPS. So if a security…

A measure of profitability analysis is a. times interest earned. b. cash flow per share. c. quick ratio. d. dividend payout ratio. would d be the right answer for this question?