Fundamental Analysis Flashcards
(31 cards)
What is the Price-to-Earnings (P/E) ratio?
The P/E ratio is a valuation metric calculated by dividing the current share price by the earnings per share (EPS).
True or False: A higher P/E ratio indicates that a stock is undervalued.
False
Fill in the blank: The formula for the Price-to-Book (P/B) ratio is ________.
Price per Share divided by Book Value per Share
What does a P/B ratio less than 1 indicate?
It may indicate that the stock is undervalued compared to its book value.
What is the Dividend Yield formula?
Dividend Yield = Annual Dividends per Share / Price per Share
True or False: A high Dividend Yield always means a good investment.
False
What does the Debt-to-Equity (D/E) ratio measure?
It measures a company’s financial leverage by comparing its total liabilities to its shareholder equity.
What is considered a safe D/E ratio?
Typically, a D/E ratio below 1 is considered safe.
What is the current ratio?
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.
Fill in the blank: A current ratio of ________ is generally considered healthy.
1.5 or higher
What does the Return on Equity (ROE) ratio indicate?
ROE measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
True or False: A higher ROE indicates a more efficient company in generating profit.
True
What is the formula for calculating the Return on Assets (ROA)?
ROA = Net Income / Total Assets
What does the Earnings Before Interest and Taxes (EBIT) margin measure?
It measures a company’s operating profitability as a percentage of its total revenue.
What is the formula for calculating the Gross Margin?
Gross Margin = (Revenue - Cost of Goods Sold) / Revenue
Fill in the blank: The Quick Ratio is also known as the ________ ratio.
Acid-Test
What is the formula for the Price-to-Sales (P/S) ratio?
P/S = Market Capitalization / Total Sales or Revenue
True or False: A lower P/S ratio is generally more favorable.
True
What does the Operating Margin indicate?
Operating Margin indicates how much profit a company makes from its operations for each dollar of sales.
What is the formula for calculating the Interest Coverage Ratio?
Interest Coverage Ratio = EBIT / Interest Expense
What does a high Interest Coverage Ratio signify?
It signifies that a company has a strong ability to pay interest on its debt.
What is the formula for the Cash Flow to Debt ratio?
Cash Flow to Debt = Operating Cash Flow / Total Debt
Fill in the blank: A higher Cash Flow to Debt ratio indicates ________.
better financial health
What is the significance of the PEG ratio?
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.
