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FINRA Series 63 Stock Valuation — practice questions

Explore 30 free Stock Valuation questions in FINRA Series 63 Finance. Open each question or exercise to read its content, reference answers and available explanation.

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Stock Valuation questions and exercises with answers

Showing questions 1–30 of 30.

A stock trades at 24 and earns 4 a share. Its price to earnings ratio is:Read the answer and worked solution →The P/E ratio shows the price an investor pays for each unit of corporate:Read the answer and worked solution →A P/E quoted as ttm is built from results over the trailing period of:Read the answer and worked solution →A P/E built from projected rather than reported earnings is described as:Read the answer and worked solution →The current price of all a company's outstanding shares together is its market:Read the answer and worked solution →A price to book ratio tells an analyst what investors will pay for each dollar of:Read the answer and worked solution →Valuation multiples split into enterprise value multiples and multiples based on:Read the answer and worked solution →The most commonly used equity multiple in stock valuation is the:Read the answer and worked solution →Dividend per share divided by share price gives the dividend:Read the answer and worked solution →A ratio comparing a company's market value with its operating cash flow is the price to:Read the answer and worked solution →In enterprise value multiples, analysts often use EBITDA as a substitute for:Read the answer and worked solution →A multiple adding rental costs back before comparing to enterprise value is:Read the answer and worked solution →A model valuing a share as the present value of all its future dividends is the dividend:Read the answer and worked solution →The most common dividend discount model, using next year's dividend, required return and growth, is the:Read the answer and worked solution →A model assuming the dividend stays at the same amount forever is the:Read the answer and worked solution →A fixed dividend paid forever is priced with the same formula used for a:Read the answer and worked solution →A dividend rising by a fixed annual percentage forever is handled by the DDM described as:Read the answer and worked solution →Comparing a calculated intrinsic value with the actual market price tells an investor whether the purchase meets their:Read the answer and worked solution →A dividend-focused investor uses the DDM to see how much of a share's price is supported by future:Read the answer and worked solution →When valuing common stock, investors treat bottom-line earnings as a factor that is:Read the answer and worked solution →Valuing a share held five years by discounting the dividends and the final price uses:Read the answer and worked solution →A share priced at 24 with earnings of 4 and a rival priced at 40 with earnings of 4 shows the rival's P/E is:Read the answer and worked solution →Catch the equity multiplesRead the answer and worked solution →Pop the Gordon inputsRead the answer and worked solution →Run the valuation gatesRead the answer and worked solution →Slice the finance wordsRead the answer and worked solution →Equity or enterpriseRead the answer and worked solution →Sort the valuation wordsRead the answer and worked solution →Type the numberRead the answer and worked solution →Valuation bingoRead the answer and worked solution →

Worked practice questions

A stock trades at 24 and earns 4 a share. Its price to earnings ratio is:

  1. 6
  2. 4
  3. 8
  4. 9
Show answer and solution

Correct answer: A. 6

1. The ratio divides share price by earnings per share. 2. 24 divided by 4 gives six. 3. The P/E ratio is 6. _Source: OpenStax Principles of Finance 2e, Chapter 11, Stocks and Stock Valuation._

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The P/E ratio shows the price an investor pays for each unit of corporate:

  1. Enrolment
  2. Earnings
  3. Equipment
  4. Employment
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Correct answer: B. Earnings

1. The denominator of the ratio is earnings per share. 2. The numerator is what the market charges for a share. 3. So it prices each unit of earnings. _Source: OpenStax Principles of Finance 2e, Chapter 11, Stocks and Stock Valuation._

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A P/E quoted as ttm is built from results over the trailing period of:

  1. 12 months
  2. 12 weeks
  3. 12 days
  4. 12 years
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Correct answer: A. 12 months

1. The abbreviation stands for trailing twelve months. 2. It uses actual reported figures, not forecasts. 3. So the window is the last 12 months. _Source: OpenStax Principles of Finance 2e, Chapter 11, Stocks and Stock Valuation._

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