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Valuation of Stock - SS1 Accounting Past Questions and Answers - page 1

1

What is the purpose of stock valuation?

A

To determine the worth of a company's shares of stock

 

B

To track employee performance

C

To calculate taxes owed

correct option: a
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2

Which of the following is NOT a method used for stock valuation?

A

Price-to-earnings ratio

 

B

Dividend discount model

C

Customer satisfaction rating

correct option: c
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3

What is the P/E ratio used for in stock valuation?

A

To compare a company's stock price to its earnings per share

B

To calculate the present value of expected future dividends

C

To calculate the present value of a company's future cash flows

correct option: a
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4

Why is stock valuation important for investors?

A

To determine whether a stock is overvalued or undervalued

B

To track employee attendance

C

To manage marketing campaigns

correct option: a
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5

What is the purpose of the discounted cash flow (DCF) analysis in stock valuation?

A

To calculate the present value of expected future dividends

B

To compare a company's stock price to its earnings per share

C

To calculate the present value of a company's future cash flows

correct option: c
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6

What are some of the methods used for stock valuation?

Some of the methods used for stock valuation include the price-to-earnings (P/E) ratio, dividend discount model (DDM), discounted cash flow (DCF) analysis, and price-to-sales (P/S) ratio.

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7

Why is stock valuation important for investors?

 

Stock valuation is important for investors because it helps them determine the fair value of a company's shares of stock. This information is crucial in making informed investment decisions, as undervalued stocks may present a good investment opportunity while overvalued stocks may be a risky investment.

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