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Exam 14: Investing in Stock

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Question 1

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Fred Manufacturing Company pays an annual dividend of $0.65 per share,has earnings per share of $2.50,and sells for $35 a share.What is this company's dividend payout ratio?

A) 18 percent
B) 25 percent
C) 28 percent
D) 26 percent
E) 32 percent

F) None of the above
G) C) and D)

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Question 2

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The price-earnings ratio for a stock investment is calculated as:

A) price per share divided by the number of stockholders.
B) the number of stockholders divided by the price per share.
C) price per share divided by the number of shares outstanding.
D) price per share divided by the earnings per share.
E) the earnings per share divided by the price per share.

F) C) and D)
G) D) and E)

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Question 3

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The record date is the date that the actual dividend payment is made to stockholders.

An investment bank is a financial firm that assists corporations in raising funds,usually by helping to sell new security issues.

Which one of the following statements is true?

A yield calculation that takes into account the total return,the original investment,and the number of years that the investment is held is called ____________ yield.

An investment theory based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called the ____________ theory.

Valerie Kilmer owns stock in the Williams Widget Company.She was just advised that in the near future she will be receiving two shares for every one share she owns today.What has the company declared that will cause this change to her shares?

A stock issued by a corporation that has a market capitalization of $300 million or less would be classified as what type of stock?

A large cap stock is a stock issued by a corporation that has a capitalization in excess of how much?

The stock of ABC Company has a dividend yield of 5%.The corporation has paid a dividend of $3.75 a share over the last 12 months and has earnings per share of $5.What is the current market price per share?

The total return on a stock is equal to the current market value of the stock minus the investor's purchase price.

Orlando Blodgett is buying stock in the Getaway Caribbean Cruise Company today.He had thought about buying the stock yesterday and if he had,he would have received this quarter's dividend.However,since he waited until today,he will not receive that dividend payment.Given this information,which one of the following dates applies to this stock today?

Which of the following is true regarding book value?

Acme Widget,Inc.has 1,000 shareholders who own a total of one million shares of its common stock.The company earned $10 million after taxes and paid out $4 million in dividends.The company has assets of $125 million and liabilities of $25 million.What is the book value per share?

A stock that pays higher than average dividends is called an income stock.

A market for existing financial securities that are currently traded among investors is called the ____________ market.

James Green just bought a security which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

If a corporation's earnings decline,the stock's price usually increases.

Because of the need for secrecy,most corporations do not supply financial information about their company on their websites.