Which of the following characteristics appeal to so-called value investors?
I. high P/E ratios.
II. low debt to equity ratios
III. high cash flow relative to price
IV. high book value relative to market price
A) I and II only
B) I and III only
C) I, II and IV only
D) II, III and IV only

Question

Quizplus · Accepted Answer

Value investors typically look for companies with low debt to equity ratios (II) as they are considered to be financially stable and less risky. They also look for high cash flow relative to price (III) as this indicates the company is generating strong cash flows and undervalued by the market. Lastly, they look for high book value relative to market price (IV) as this suggests the stock is undervalued and may offer a margin of safety. High P/E ratios (I) are not typically attractive to value investors as they indicate a high price relative to earnings, which may indicate an overpriced stock.

Which of the Following Characteristics Appeal to So-Called Value Investors