Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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The price of a stock is calculated by multiplying the benchmark P/E (price-earnings) ratio with the Blank______.
Multiple choice question.
benchmark price-sales ratio
earnings per share
capital yield ratio
dividend per share
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- Ratios concerned with returns from, and the performance of, shares are 1.Market ratios 2.effeciency ratio 3.liquidity ratios 4.solvency ratioarrow_forwardWhat does the price-to-earnings (P/E) ratio indicate? A) The percentage of earnings paid out as dividends B) The market price per share divided by earnings per share C) The rate of return on shareholders' equity D) The book value of equity per sharearrow_forwardUsing 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 $109.21arrow_forward
- Which of the following ratios would analysts use to value stocks? Select one: a. All of the above b. Price per Earnings c. Price per sales d. Price per cash flowarrow_forwardTRUE OR FALSE Price earnings ratio refers to the multiplier applied to earnings per share to determine current value of common stock.arrow_forwardCalculation of which if the following metrics require knowledge of the company’s share price? Choose two A) return on equity B) dividend yield C) dividend payout ratio D) ratio of market-to-book value E) leverage ratioarrow_forward
- The dividend yield rate is equal to the dividends per share divided by the par value per share of common stock. Group of answer choices True Falsearrow_forwardThe return on equity is calculated using which of the following formulas? Multiple Choice Net income Stockholders' equity Net income - Average stockholders' equity Net income ÷ Common Stock Net income ÷ Retained earningsarrow_forwardWhich of the following represents the value of a stock calculated using the zero-growth model? Multiple choice question. (Dividends)Discount rate Dividends / Discount rate Dividends × Discount rate Discount rate / Dividendsarrow_forward
- The price-earnings ratio on common stock is calculated as a.market price per share of common stock, divided by earnings per share on common stock b.market price per share of common stock, divided by dividends per share of common stock c.earnings per share of common stock, divided by market price per share of common stock d.dividends per share of common stock, divided by earnings per share on common stockarrow_forwardIdentify the components of the total return of a stock. More than one answer may be correct. Multiple select question. Taxes Capital gains yield Dividend yield Past pricesarrow_forwardUsing the information in the table below, 1.Calculate the Price Earnings Ratio for both stocks. Share Price Per Share Stock X ($) 25 Earnings Per Share 2.00 Stock Y ($) 20 0.67 2. Interpret the results obtained in part above, by highlighting the implications for a firm of having a low P/E or a high P/E.arrow_forward
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