#1
Which of the following methods is used to value a stock based on its expected future cash flows?
Dividend Discount Model (DDM)
ExplanationValues stock based on future cash flows.
#2
What does the price-earnings ratio (P/E ratio) indicate about a stock?
The company's earnings relative to its stock price
ExplanationReflects earnings in relation to stock price.
#3
Which of the following factors affects the intrinsic value of a stock according to the Dividend Discount Model (DDM)?
Expected future dividends
ExplanationFuture dividends impact intrinsic value.
#4
What is the formula to calculate the Dividend Discount Model (DDM) for a perpetuity?
D0 / (r - g)
ExplanationFormula for DDM in perpetuity.
#5
What is the formula for the Gordon Growth Model (GGM)?
P = D0 / (r - g)
ExplanationFormula for GGM valuation.
#6
What does the Gordon Growth Model (GGM) focus on when valuing a stock?
Future dividends
ExplanationFocuses on future dividend payments.
#7
If a company has a high dividend payout ratio, what does this indicate?
The company is paying out a large portion of its earnings as dividends
ExplanationIndicates high proportion of earnings distributed as dividends.
#8
Which financial statement provides information about a company's dividends paid?
Statement of Cash Flows
ExplanationContains data on dividends disbursed.
#9
What does a high dividend yield suggest about a stock?
The stock is undervalued
ExplanationImplies stock is underpriced relative to dividends.
#10
What does the term 'ex-dividend date' refer to?
The date when shareholders are entitled to receive dividends
ExplanationDate shareholders qualify for dividend payment.
#11
Which of the following factors affects the Gordon Growth Model (GGM) the most?
Expected dividend growth rate
ExplanationExpected growth rate influences GGM significantly.
#12
What is the significance of the Dividend Discount Model (DDM) in stock valuation?
It accounts for all potential future cash flows of a stock
ExplanationConsiders all future cash flows for valuation.
#13
Which of the following is NOT considered a method for stock valuation?
Inventory Valuation
ExplanationInventory valuation is unrelated to stock valuation.
#14
What does the Dividend Discount Model (DDM) assume about dividend growth?
It assumes a constant dividend growth rate
ExplanationAssumes steady growth rate in dividends.
#15
In stock valuation, what does the term 'terminal value' refer to?
The future value of a stock after a certain period
ExplanationValue of stock at end of specified period.