SESSION:11 Stocks and Stock ValuationReview Questions

Session:11 Stocks and Stock Valuation

Review Questions

Principles of Finance | Leadership Development – Micro-Learning Session

Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-finance

1 . Briefly discuss one of the primary benefits of using comparative P/E ratios.

2 . Name an important characteristic of companies for which the price-to-book (P/B) ratio does not work well.

3 . Briefly describe the main type of scenario in which the two-stage DDM approach might be used to value a firm and its stock.

4 . Briefly describe a major shortcoming of the zero growth DDM model.

5 . Briefly describe the required inputs for the discounted cash flow (DCF) model.

6 . Briefly describe preferred stock and some of its ownership advantages compared to common stock.

7 . Briefly explain what is meant by the terms cumulative and noncumulative as they relate to preferred stocks.

8 . What were SuperDOT and SOES, and what were they designed to do?

9 . What are operational efficiency and informational efficiency, and how do they differ in terms of trading markets?

10 . What is meant by informational efficiency, and how does it affect the price of a stock?

Session:11 Stocks and Stock Valuation

Review Questions

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