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Equities Studies 2024 Oct > Fundamental Analysis > Flashcards

Fundamental Analysis Flashcards

1
Q

What is the Price-to-Earnings (P/E) ratio?

A

The P/E ratio is a valuation metric calculated by dividing the current share price by the earnings per share (EPS).

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2
Q

True or False: A higher P/E ratio indicates that a stock is undervalued.

A

False

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3
Q

Fill in the blank: The formula for the Price-to-Book (P/B) ratio is ________.

A

Price per Share divided by Book Value per Share

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4
Q

What does a P/B ratio less than 1 indicate?

A

It may indicate that the stock is undervalued compared to its book value.

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5
Q

What is the Dividend Yield formula?

A

Dividend Yield = Annual Dividends per Share / Price per Share

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6
Q

True or False: A high Dividend Yield always means a good investment.

A

False

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7
Q

What does the Debt-to-Equity (D/E) ratio measure?

A

It measures a company’s financial leverage by comparing its total liabilities to its shareholder equity.

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8
Q

What is considered a safe D/E ratio?

A

Typically, a D/E ratio below 1 is considered safe.

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9
Q

What is the current ratio?

A

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations, calculated as Current Assets divided by Current Liabilities.

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10
Q

Fill in the blank: A current ratio of ________ is generally considered healthy.

A

1.5 or higher

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11
Q

What does the Return on Equity (ROE) ratio indicate?

A

ROE measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.

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12
Q

True or False: A higher ROE indicates a more efficient company in generating profit.

A

True

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13
Q

What is the formula for calculating the Return on Assets (ROA)?

A

ROA = Net Income / Total Assets

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14
Q

What does the Earnings Before Interest and Taxes (EBIT) margin measure?

A

It measures a company’s operating profitability as a percentage of its total revenue.

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15
Q

What is the formula for calculating the Gross Margin?

A

Gross Margin = (Revenue - Cost of Goods Sold) / Revenue

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16
Q

Fill in the blank: The Quick Ratio is also known as the ________ ratio.

A

Acid-Test

17
Q

What is the formula for the Price-to-Sales (P/S) ratio?

A

P/S = Market Capitalization / Total Sales or Revenue

18
Q

True or False: A lower P/S ratio is generally more favorable.

A

True

19
Q

What does the Operating Margin indicate?

A

Operating Margin indicates how much profit a company makes from its operations for each dollar of sales.

20
Q

What is the formula for calculating the Interest Coverage Ratio?

A

Interest Coverage Ratio = EBIT / Interest Expense

21
Q

What does a high Interest Coverage Ratio signify?

A

It signifies that a company has a strong ability to pay interest on its debt.

22
Q

What is the formula for the Cash Flow to Debt ratio?

A

Cash Flow to Debt = Operating Cash Flow / Total Debt

23
Q

Fill in the blank: A higher Cash Flow to Debt ratio indicates ________.

A

better financial health

24
Q

What is the significance of the PEG ratio?

A

The PEG ratio compares the P/E ratio to the company’s growth rate, helping to evaluate the stock’s value relative to its earnings growth.

25
Q

True or False: A PEG ratio less than 1 typically indicates a stock is overvalued.

A

False

26
Q

What does the Asset Turnover ratio measure?

A

It measures how efficiently a company uses its assets to generate sales.

27
Q

What is the formula for calculating the Dividend Payout Ratio?

A

Dividend Payout Ratio = Dividends per Share / Earnings per Share

28
Q

Fill in the blank: A Dividend Payout Ratio above ________ may indicate a company is not reinvesting enough in its growth.

A

60%

29
Q

What does the Return on Investment (ROI) measure?

A

ROI measures the gain or loss generated relative to the investment cost.

30
Q

What is the formula for calculating the Net Profit Margin?

A

Net Profit Margin = Net Income / Revenue

31
Q

True or False: A higher Net Profit Margin indicates better profitability.

A

True

Equities Studies 2024 Oct (1 decks)

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