Question 1

How could unexpected inflation affect the P/E ratio?

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Question 2

What are "earnings surprises?"How do they affect stock prices?

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Question 3

Can an investor that wants to use the approach of projected earnings and P/Es find help in Value Line?

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Question 4

When an investor buys a share of common stock he/she buys a claim of ownership.How is this claim represented on the balance sheet?

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Question 5

Should an investor seek companies with low P/Es or high P/Es?

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Question 6

What is meant by "quality of earnings," and how does it affect the equity analyst's job?

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Question 7

How accurate are professional earnings estimates?Do purely mechanical models give better results than analysts who add subjective assessment to the data?

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Question 8

What is the internal (sustainable)growth rate?How is it calculated?

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Question 9

What is the relationship of the Financial Accounting Standards Board and the Securities and Exchange Commission?

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Question 10

What three variables affect the P/E ratio?How does each affect it?

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Question 11

Regardless of how closely a company adheres to good accounting practices and auditors do their job,investors need to examine "Notes to the Financial Statements" on 10-K and 10-Q Reports to understand the company's financial situation.

Accepted Answer

The "Notes to the Financial Statements" provide important additional information and clarification about a company's financial statements, and can help investors gain a deeper understanding of the company's financial situation.

Question 12

In the model P/E=(D₁/E₁)/(k - g),the P/E should increase if the dividend payout ratio increases,other things the same.If the payout ratio was intentionally increased by the board of directors,other things are likely not to stay the same.What is likely to happen to the dividend growth rate and the required return?

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Quiz 15: Company Analysis