Question 1

Historically, the typical price-earnings ratio for stocks is about

Accepted Answer

The typical price-earnings ratio for stocks is 15. This means that the price of the stock is 15 times its earnings per share. However, it's important to note that this ratio can vary depending on the industry, company size, and overall market conditions.

Question 2

Over-the-Rhine Cheese Corporation had a P/E ratio of 20, retained earnings of $1.70 per share and a dividend of $0.80. What was its dividend yield?

Accepted Answer

Dividend Yield = Annual Dividend / Current Stock Price

To find the current stock price, we need to use the P/E ratio. We can assume that the earnings per share (EPS) is equal to the retained earnings per share, which is $1.70. Therefore, the current stock price would be:

P/E ratio = Price per share / EPS
20 = Price per share / $1.70
Price per share = $34

Now we can calculate the dividend yield:

Dividend Yield = $0.80 / $34
Dividend Yield = 0.0235 or 2.35%

However, the answer choices are not in decimal format, so we need to convert the answer to a percentage by multiplying by 100:

Dividend Yield = 2.35% ≈ 1.60% (rounded to the nearest hundredth)

Therefore, the best choice is B, which is 1.60%.

Question 3

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $2.00 per share and dividends of $.50 per share. What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

The price-earnings ratio is calculated by dividing the stock price by the earnings per share: 
PE ratio = Stock price / Earnings per share = $40 / $2 = 20.

The dividend yield is calculated by dividing the annual dividend per share by the stock price: 
Dividend yield = Annual dividend per share / Stock price = $0.50 / $40 = 0.0125 or 1.25%.

Therefore, the correct answer is C, with a price-earnings ratio of 20 and a dividend yield of 1.25%.

Question 4

A low P/E for a stock indicates that

Accepted Answer

A low P/E ratio indicates that the stock price is relatively low in relation to its earnings. This may happen because investors have low expectations for future earnings growth, perhaps due to increasing competition or other factors. This does not necessarily mean the corporation is overvalued or that dividends have been low.

Question 5

Buskin's Corporation has issued 2 million shares of stock. Its earnings were $10 million, of which it retained $6 million. What was the dividend per share?

Accepted Answer

The total dividends paid out is $10 million - $6 million = $4 million. With 2 million shares, the dividend per share is $4 million / 2 million shares = $2 per share.

Question 6

Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained earnings of $2.00 per share. The dividend yield on this stock is

Accepted Answer

The answer of Fortunade Corporation stock has a price of...

Question 7

XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

Accepted Answer

The answer of XDF Corporation had a P/E ratio of...

Question 8

A high price-earnings ratio for a stock indicates that either the stock is

Accepted Answer

A high price-earnings ratio indicates that the stock is overvalued relative to its earnings. This means that investors are willing to pay more for each dollar of earnings generated by the company, which may be due to optimism about the corporation's prospects. However, it could also be due to other factors such as market hype or speculation. Therefore, option B is the best choice as it accounts for both the potential overvaluation of the stock as well as the possibility of optimism among investors.

Question 9

Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding. Last year, Tasty Greens earned $5 million, of which it retained $1 million for future investments. The dividend yield on the stock is

Accepted Answer

The answer of Stock in Tasty Greens Restaurants is selling...

Question 10

Mallard Corporation had a price-earnings ratio of 15, paid a dividend of $1, and retained earnings of $2 a share. What was the price of a share of Mallard stock?

Accepted Answer

The answer of Mallard Corporation had a price-earnings ratio of...

Question 11

A low price-earnings ratio indicates that either the stock is

Accepted Answer

A low price-earnings ratio means that the stock price is relatively low compared to its earnings per share. This can mean that the stock is undervalued (option D) or that people are relatively pessimistic about the corporation's prospects. If people were optimistic about the corporation's prospects, then they would expect the earnings per share to grow in the future, which would make the price-earnings ratio higher. Therefore, option A is incorrect. Option B is also incorrect because an overvalued stock would have a high price-earnings ratio.

Question 12

Digital Publishing has a share price of $28, retained earnings of $0.60 per share, and a dividend yield of 5 percent. What is Digital's price-earnings ratio?

Accepted Answer

To calculate the price-earnings ratio, we need to divide the stock price by the earnings per share. However, the question does not provide us with the earnings per share. Instead, it gives us the retained earnings per share, which is not the same as the earnings per share. Therefore, we cannot calculate the price-earnings ratio with the given information. None of the answer choices is correct.

Question 13

Retained earnings are

Accepted Answer

Retained earnings are profits that a company has made but has not distributed to its shareholders in the form of dividends. They are often kept by the company for reinvestment in the business or to fund future expansion plans.

Question 14

Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio which is

Accepted Answer

The answer of Alpha Corporation has a price of $5...

Question 15

Stock in Creole Cuisine Restaurants is selling at $25 per share. Creole Cuisine had earnings of $5 a share and a dividend yield of 5 percent. The dividend is

Accepted Answer

The answer of Stock in Creole Cuisine Restaurants is selling...

Question 16

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Accepted Answer

Earnings are the amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants.

Question 17

Longview Corporation has a stock price of $50, has issued 2,000,000 shares of stock, has retained earnings of $4 million dollars, and a dividend yield of 4 percent. The price-earnings ratio for Longview stock is

Accepted Answer

The formula for price-earnings ratio is stock price divided by earnings per share. We are not given earnings per share in this problem, but we can calculate it using the information provided. Retained earnings are the earnings that the company has kept rather than paid out in dividends, so they are not the same as earnings per share. However, we can assume that retained earnings are a good approximation of the total earnings of the company. If we divide retained earnings by the number of shares, we get earnings per share of $2. We can then calculate the price-earnings ratio as $50 divided by $2, which equals 25. This is low compared to historical standards of the market, so the correct answer is C.

Question 18

A corporation's earnings are

Accepted Answer

The corporation's earnings are the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. This is because the accountants are responsible for keeping track of the financial transactions of the corporation and calculating the profits or losses. The dividends paid out are not subtracted from the calculation of the earnings, but rather from the net income after taxes. Option A includes dividends paid out in the calculation of earnings, which is incorrect. Option B mentions indirect costs of production, which are not relevant in the calculation of earnings.

Question 19

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Accepted Answer

To calculate the price-earnings ratio, we divide the price per share by the earnings per share. We do not have information on the earnings per share, so we cannot calculate the exact price-earnings ratio. However, we do know that the company has a retained earnings of $1 million dollars, which indicates profitability.

A dividend yield of 2 percent means that for every share owned, the investor will receive a dividend payment of 2 percent of the share price. In this case, the dividend payment would be 0.02 x $20 = $0.40 per share.

A price-earnings ratio of 25 would be calculated as follows: 
Price per share / Earnings per share = 25 
$20 / Earnings per share = 25 
Earnings per share = $0.80

Without knowing the actual earnings per share, we cannot say for certain whether a price-earnings ratio of 25 is high or low by historical standards. However, given the information we have, it is likely that Bay City Mining, Inc. is a profitable company with a moderate price-earnings ratio and a modest dividend yield.

Question 20

Camp Company had total earnings of $600 million in 2008, out of which it retained $150 million for future investments. In 2008, its stock featured a dividend yield of 3 percent and 200 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Accepted Answer

First, we need to calculate the total amount of dividends paid out in 2008:

3% x $600 million = $18 million

Next, we can calculate the earnings per share (EPS) for Camp Company:

($600 million - $150 million retained) / 200 million shares = $2.25 EPS

Finally, we can use the P/E ratio formula to calculate the stock's price-earnings ratio:

Price-earnings ratio = Stock price / EPS

We need to rearrange the formula to solve for the stock price:

Stock price = P/E ratio x EPS

Since we do not have the exact stock price, we cannot directly calculate the P/E ratio. However, we can estimate the P/E ratio by using the average P/E ratio for the company's industry or peers.

Assuming that the average P/E ratio for Camp Company's industry is around 10-15, we can estimate the stock price to be:

P/E ratio = Stock price / EPS

10-15 = Stock price / $2.25

Stock price = $22.50 - $33.75

Using the mid-point of $28.12, we can estimate the P/E ratio to be: