The PE ratio approach to valuing stock

The PE ratio approach to valuing stock


9. The PE ratio approach to valuing stock is especially useful for valuing

A) privately held firms.

B) firms that don’t pay dividends.

C) least known of the investment valuation indicators

D) both A and B.

E) neither (a) nor (b).

10. A share of common stock in a firm represents an ownership interest in that firm and allow stockholders to

A) vote.

B) receive dividends.

C) receive interest payments.

D) both A and B.

E) both B and C.

11. What is the primary disadvantage of an ETF?

A) ETFs tend to have lower management fees than do comparable index mutual bonds.

B) ETFs usually have no minimum investment amount.

C) Investors most of the time have to pay a broker commission each time they buy or sale shares.

D) EFT’s offer Diversification.

E) None of the above are disadvantages of an ETF.

12. Suppose the average industry PE ratio for auto parts retailers is 20. What is the current price of Auto Zone stock if the retailer’s earnings per share are projected to be $1.85?

A) $21.85

B) $37

C) $10.81

D) $9.25

E) $0.07

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