投资学investment题库Chap018.docVIP

Multiple Choice Questions 1. ________ is equal to the total market value of the firms common stock divided by (the replacement cost of the firms assets less liabilities). A) Book value per share B) Liquidation value per share C) Market value per share D) Tobins Q E) None of the above. Answer: D Difficulty: Easy Rationale: Book value per share is assets minus liabilities divided by number of shares. Liquidation value per share is the amount a shareholder would receive in the event of bankruptcy. Market value per share is the market price of the stock. 2. High P/E ratios tend to indicate that a company will _______, ceteris paribus. A) grow quickly B) grow at the same speed as the average company C) grow slowly D) not grow E) none of the above Answer: A Difficulty: Easy Rationale: Investors pay for growth; hence the high P/E ratio for growth firms; however, the investor should be sure that he or she is paying for expected, not historic, growth. 3. _________ is equal to (common shareholders equity/common shares outstanding). A) Book value per share B) Liquidation value per share C) Market value per share D) Tobins Q E) none of the above Answer: A Difficulty: Easy Rationale: See rationale for test bank question 18.1  4. ________ are analysts who use information concerning current and prospective profitability of a firms to assess the firms fair market value. A) Credit analysts B) Fundamental analysts C) Systems analysts D) Technical analysts E) Specialists Answer: B Difficulty: Easy Rationale: Fundamentalists use all public information in an attempt to value stock (while hoping to identify undervalued securities). 5. The _______ is defined as the present value of all cash proceeds to the investor in the stock. A) dividend payout ratio B) intrinsic value C) market capitalization rate D) plowback ratio E) none of the above Answer: B Difficulty: Easy Rationale: The cash flows