#1
Which of the following financial ratios measures a company's ability to pay its short-term liabilities with its short-term assets?
Current Ratio
ExplanationMeasures short-term liquidity.
#2
What does the P/E ratio indicate about a company's stock?
How much the stock is overvalued or undervalued
ExplanationAssesses stock valuation relative to earnings.
#3
Which of the following financial ratios measures a company's efficiency in generating profits from its assets?
Return on Assets (ROA)
ExplanationEvaluates asset utilization for profit.
#4
What does the Dividend Yield ratio indicate about a stock?
The rate at which the company pays dividends relative to its stock price
ExplanationReflects dividend distribution.
#5
Which of the following financial ratios measures a company's ability to cover its interest expenses with its earnings before interest and taxes?
Times Interest Earned (TIE) Ratio
ExplanationAssesses interest coverage.
#6
What does the term 'EBITDA' stand for in financial analysis?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationEarnings measure before certain expenses.
#7
In stock valuation, what does the term 'intrinsic value' refer to?
The stock's potential price based on its fundamental characteristics
ExplanationEstimates true worth based on fundamentals.
#8
Which of the following is NOT a method for valuing a company's stock?
Balance Sheet Analysis
ExplanationNot a direct valuation method.
#9
Which valuation method focuses on estimating a company's worth based on the present value of its expected future cash flows?
Discounted Cash Flow (DCF) Analysis
ExplanationProjects future cash flows for valuation.
#10
In stock analysis, what does the term 'book value' represent?
The historical cost of a company's assets
ExplanationValue of assets recorded on balance sheet.
#11
Which valuation method compares a company's financial metrics to those of similar firms in the same industry?
Comparable Company Analysis (CCA)
ExplanationBenchmarking against industry peers.
#12
What does the term 'WACC' stand for in finance?
Weighted Average Cost of Capital
ExplanationOverall cost of financing.
#13
What does the term 'beta' measure in stock analysis?
The volatility of a stock relative to the market
ExplanationIndicates stock's market risk.
#14
What is the purpose of using the Gordon Growth Model in stock valuation?
To estimate the company's terminal value
ExplanationPredicts perpetual growth rate.
#15
Which of the following is NOT considered a fundamental analysis tool in stock valuation?
Technical Indicators
ExplanationRelies on price movements.
#16
What does the term 'cost of equity' represent in financial analysis?
The cost of financing through equity
ExplanationExpense of raising capital from equity.
#17
What does the term 'CAPM' stand for in finance?
Capital Asset Price Model
ExplanationDetermines expected return on investment.