Valuation of Stock - SS1 Accounting Past Questions and Answers - page 1
What is the purpose of stock valuation?
To determine the worth of a company's shares of stock
To track employee performance
To calculate taxes owed
Which of the following is NOT a method used for stock valuation?
Price-to-earnings ratio
Dividend discount model
Customer satisfaction rating
What is the P/E ratio used for in stock valuation?
To compare a company's stock price to its earnings per share
To calculate the present value of expected future dividends
To calculate the present value of a company's future cash flows
Why is stock valuation important for investors?
To determine whether a stock is overvalued or undervalued
To track employee attendance
To manage marketing campaigns
What is the purpose of the discounted cash flow (DCF) analysis in stock valuation?
To calculate the present value of expected future dividends
To compare a company's stock price to its earnings per share
To calculate the present value of a company's future cash flows
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.
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.