Common Stock Valuation

This question bank verified by Studydeets

All Questions

Question 1

Free

Multiple Choice

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

Choose correct answer/s

technical analysis

conceptual analysis

prediction valuation

fundamental analysis

discounted valuation

Check answer

Question 2

Free

Multiple Choice

The method of valuing a stock based on the present value of the future income derived from that stock is called:

Choose correct answer/s

technical analysis.

constant valuation.

the basic stock valuation method.

compound dividend analysis.

the dividend discount model.

Check answer

Question 3

Free

Multiple Choice

The model used to value a stock that pays a dividend which increases at a constant rate forever is referred to as which one of the following? Assume the growth rate is less than the discount rate.

Choose correct answer/s

diminishing valuation growth model

increasing valuation growth model

constant perpetual growth model

irregular growth perpetual model

two-stage growth model

Check answer

Question 4

Free

Multiple Choice

How is a sustainable dividend growth rate defined?

Choose correct answer/s

a constant rate at which dividends increase

a rate of growth that does not exceed two percent of the annual increase in revenue

a rate of growth that is set equal to one-half of the average growth rate of a firm's earnings

a rate that can be supported over time by a company's earnings

a rate of dividend growth that is equal to the discount rate used to value the firm's stock

Check answer

Question 5

Free

Multiple Choice

The portion of net income that is held by a firm,for future growth,comprises which one of the following balance sheet accounts?

Choose correct answer/s

capital surplus

common stock

internal earnings

retained earnings

net earnings

Check answer

Question 6

Multiple Choice

What is the percentage of a firm's earnings that is distributed to shareholders called?

Choose correct answer/s

payout ratio

distribution percentage

retention ratio

dividend portion

outflow ratio

To unlock the question

Question 7

Multiple Choice

What is the percentage of a firm's net income which is reinvested in the firm to support future growth called?

Choose correct answer/s

payout ratio

distribution percentage

retention ratio

equity ratio

equity reinvestment

To unlock the question

Question 8

Multiple Choice

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the _____ dividend growth model.

Choose correct answer/s

flexible

increasing

two-stage

stepped up

geometric

To unlock the question

Question 9

Multiple Choice

What is beta?

Choose correct answer/s

a rate of return measure

the return on a stock relative to the overall market

the rate of dividend growth

the percentage of net income paid out as a dividend

measure of a stock's risk relative to the stock market average

To unlock the question

Question 10

Multiple Choice

What is the accounting relationship in which earnings per share minus dividends equal the change in book value per share called?

Choose correct answer/s

clean surplus relationship

economic value added relationship

accounting earnings identity

payout-retention identity

dividend valuation equation

To unlock the question

Question 11

Multiple Choice

The Free Cash Flow Model:
I)can be used to value a company with negative earnings
II)is based on a firm having positive cash flows
III)requires that a firm pay a dividend
IV)directly estimates a value for a firm's equity

Choose correct answer/s

I only

I and II only

I and III only

I, II, and III only

I, II, III, and IV

To unlock the question

Question 12

Multiple Choice

What is the market value of a share of stock divided by the net income per share called?

Choose correct answer/s

earnings per share

price-earnings ratio

value-earnings ratio

earnings yield

market multiple

To unlock the question

Question 13

Multiple Choice

The net income per share divided by the market price per share is called the:

Choose correct answer/s

profit margin.

profit yield.

market yield.

earnings yield.

income ratio.

To unlock the question

Question 14

Multiple Choice

Growth stocks are frequently described as having which one of the following characteristics?

Choose correct answer/s

high dividends

a value orientation

high P/E ratios

low cash flows per share

low retention ratios

To unlock the question

Question 15

Multiple Choice

The price-book ratio is computed as the market value per share divided by the per share book value of:

Choose correct answer/s

total assets.

long-term debt.

equity.

long-term debt plus equity.

net working capital.

To unlock the question

Question 16

Multiple Choice

A firm's current stock price divided by the firm's revenue per share is referred to as which one of the following ratios?

Choose correct answer/s

price-earnings

price-book

price-income

price-sales

price-cash flow

To unlock the question

Question 17

Multiple Choice

An analysis of which of the following are commonly included as part of fundamental analysis?
I)sales
II)book value
III)earnings per share
IV)cash flow

Choose correct answer/s

I and II only

I and IV only

II, III, and IV only

I, II, and IV only

I, II, III, and IV

To unlock the question

Question 18

Multiple Choice

Based on the dividend discount model,an increase in which of the following will lower the current value of a stock?
I)amount of the next dividend
II)dividend growth rate
III)discount rate

Choose correct answer/s

I only

III only

I and II only

II and III only

I, II, and III

To unlock the question

Question 19

Multiple Choice

The dividend discount model assumes that:

Choose correct answer/s

the dividend payout ratio will remain constant.

the dividend growth rate is equal to the discount rate.

discount rate increases at a constant rate.

at least one dividend will be paid in the future.

the dividend payout ratio increases at a constant rate.

To unlock the question

Question 20

Multiple Choice

The constant perpetual growth model assumes the:

Choose correct answer/s

dividends are paid for a stated number of years only.

net income is all paid out in dividends.

growth rate is less than the discount rate.

dividends are constant in amount.

discount rate increases at a constant rate.

To unlock the question

Common Stock Valuation

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

The method of valuing a stock based on the present value of the future income derived from that stock is called:

The model used to value a stock that pays a dividend which increases at a constant rate forever is referred to as which one of the following? Assume the growth rate is less than the discount rate.

How is a sustainable dividend growth rate defined?

The portion of net income that is held by a firm,for future growth,comprises which one of the following balance sheet accounts?

What is the percentage of a firm's earnings that is distributed to shareholders called?

What is the percentage of a firm's net income which is reinvested in the firm to support future growth called?

The model used to value the stock of a firm which has a short-term growth rate that varies from its long-term growth rate is called the _____ dividend growth model.

What is beta?

What is the accounting relationship in which earnings per share minus dividends equal the change in book value per share called?

The Free Cash Flow Model:I)can be used to value a company with negative earningsII)is based on a firm having positive cash flowsIII)requires that a firm pay a dividendIV)directly estimates a value for a firm's equity

What is the market value of a share of stock divided by the net income per share called?

The net income per share divided by the market price per share is called the:

Growth stocks are frequently described as having which one of the following characteristics?

The price-book ratio is computed as the market value per share divided by the per share book value of:

A firm's current stock price divided by the firm's revenue per share is referred to as which one of the following ratios?

An analysis of which of the following are commonly included as part of fundamental analysis?I)salesII)book valueIII)earnings per shareIV)cash flow

Based on the dividend discount model,an increase in which of the following will lower the current value of a stock?I)amount of the next dividendII)dividend growth rateIII)discount rate

The dividend discount model assumes that:

The constant perpetual growth model assumes the:

The Free Cash Flow Model:
I)can be used to value a company with negative earnings
II)is based on a firm having positive cash flows
III)requires that a firm pay a dividend
IV)directly estimates a value for a firm's equity

An analysis of which of the following are commonly included as part of fundamental analysis?
I)sales
II)book value
III)earnings per share
IV)cash flow

Based on the dividend discount model,an increase in which of the following will lower the current value of a stock?
I)amount of the next dividend
II)dividend growth rate
III)discount rate