MARKET RATIOS

Question 1

Market Capitalization

Answer 1

Common Stock Price per Share X Common Stock Shares Outstanding

Question 2

Market/Book Ratio

Answer 2

Common Stock per Share
____________________
Book Value per Share

OR

Market Capitalization
________________
Common Stockholder’s Equity

Question 3

Book Value per Share

Answer 3

Common Stockholder’s Equity
________________________
Common Stock Shares Outstanding

Question 4

Price Earnings Ratio

Answer 4

Common Stock Price per Share
_________________________
Earnings per Share

Question 5

Sales to Cash Flow Ratio

Answer 5

measure of financial strength

Question 6

Investment Turnover Ratio

Answer 6

Sales
_________
Book Value (net worth)

Question 7

Formula for Cost of Equity using dividend growth model

Dividend Yield Plus Growth Rate (dividend valuation) Approach

Answer 7

Expected dividend per share
_______________________ + Dividend
Current Stock Price per share Growth Rate
(net of flotation costs per share)