Sample Questions
 

 

1. Which of the following is another name for the required return on a stock?

A. Value.    
B. Dividend payout ratio.
C. Retention ratio.
D. Discount rate.

2. Which of the following best describes the constant-growth dividend discount model?

A It is the formula for the present value of a finite, uneven cash flow stream.
B. It is the formula for the present value of a growing perpetuity.
C. It is the formula for the present value of an ordinary annuity.
D. It is the formula for the present value of a growing annuity.

3. Which of the following do financial analysts consider least important when assessing the long-run economic and financial outlook of a company?

A. General economic conditions.    
B. Expected changes in EPS.
C. Prospects of the relevant industry.
D. Expected return on equity.

4. Analysts commonly consider all of the following to be indicators that the market is overvalued except

A. high average dividend yield.    
B. high average P/E ratio.
C. high average ratio of stock prices to corporate sales.
D. high average price-to-book ratio.

5. Which of the following is equal to the present value of all cash proceeds received by a stock investor?

A. Value.    
B. Discount rate.
C. Retention ratio.
D. Dividend payout ratio.


Answers:      1 (D), 2 (B), 3 (A), 4 (A), 5 (A)

 

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