Market Analysis and Valuation Flashcards
6 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Market Analysis and Valuation flashcards as text
What is the Price-to-Sales (P/S) ratio?
Answer: The ratio of a company's stock price to its annual revenue per share
The P/S ratio compares a company's stock price to its revenue per share, commonly used to value companies that are not yet profitable and have no meaningful earnings.
What does a high P/E ratio generally suggest about investor sentiment?
Answer: Investors expect strong future earnings growth and are willing to pay a premium for current earnings
A high P/E ratio typically indicates investors expect significant future earnings growth, justifying the premium price — though it can also signal overvaluation.
What is the Discounted Cash Flow (DCF) valuation method?
Answer: A valuation technique that estimates a company's value by projecting future cash flows and discounting them to present value
DCF analysis estimates an investment's value by forecasting future cash flows and discounting them back to the present using a required rate of return, reflecting the time value of money.
What does 'support level' mean in technical analysis?
Answer: A price floor where a stock has historically found buying interest and stopped declining
A support level is a price point where demand for a stock is strong enough to prevent it from falling further, as buyers consistently step in at or near that price.
What is the meaning of 'return on equity' (ROE)?
Answer: A measure of profitability showing how much net income a company generates for each dollar of shareholder equity
ROE measures a company's efficiency at generating profits from shareholders' equity, calculated as net income divided by total shareholders' equity — a higher ROE generally indicates more effective management.
What is a company's book value?
Answer: The value of a company's total assets minus its total liabilities, representing net asset value
Book value is the net asset value of a company — total assets minus total liabilities — representing what shareholders would theoretically receive if the company were liquidated.