The share price of a company reflects the market's opinion about the company. Which of the following is the primary determinant of market share price for a given company? Increase in the size of assets of the company The future growth and profit prospects of the company The size of its turnover - More turnovers means higher share price The financial reports of the last four years

The share price of a company reflects the market's opinion about the company. Which of the following is the primary determinant of market share price for a given company? Increase in the size of assets of the company The future growth and profit prospects of the company The size of its turnover - More turnovers means higher share price The financial reports of the last four years

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 37CE: Stockholder Profitability Ratios The following information pertains to Montague Corporation...

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Stockholder Profitability Ratios The following information pertains to Montague Corporation Required: Calculate the return on common equity and the earnings per share. (Note: Round answers to two decimal places.)
The book value per share is usually a close approximation of the market price per share. is the same as the par value per share. may be useful in determining the trend of a shareholders’ per share equity in a corporation. always falls within the annual range of a company's market value per share.
When it comes to the market value of a company, is it true or not that it equals the number of outstanding shares multiplied by the most recent transaction price per share.
The price to earnings (P/E) ratio is an after-tax metric reflecting growth potential of the common stock of a corporation. P is the selling price (per share) of the common stock, and E is the after-tax earnings per year of a share of stock. A high P/E ratio, for example, indicates that a firm is in a high-growth industry (such as biotechnology) and that annual earnings are not as important to investors as the growth rate of the price of common stock is. Because a corporation can be assumed to have an indefinitely long life, the P/E ratio can be likened to the (P/A, i%,N) factor when N approaches infinity. For a certain transportation company, the P/E ratio is 12. What is the implied IRR for this relatively stable company?
If we know that a firm has a net profit margin of 4.3 %, total asset turnover of 0.77, and a financial leverage multiplier of 1.36, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity?
The following information relates to three companies in the same industry Latest Earnings Dividends Company market price per share per share A $ 35 $11 $0 B $40 $5 $4 C $ 90 $10 $6 Required: Explain and calculate the price -earnings and dividend yield ratios. On the basis of only the foregoing information, which company represents the most attractive investment opportunity to you? Explain.
Assuming the company continues its current growth rate, what is the value per share of the company’s stock?
Which of the following events would cause a company's cost of retained earnings to increase? Group of answer choices the company's stock price falls the company's forecasted growth in profits and dividends is reduced the company diversifies into a safer industry the overall beta for a company falls
1) What is meant by the term 'dividend policy'?A) The desired pattern of dividends over time when a company determines the proportion of profits to be paid out to shareholders, usually done periodicallyB) The selection of specific groups of shareholders to receive dividends this yearC) The balance to be struck between paying interim dividends and final dividendsD) The determination of the dividend policies of industrial firms by government, designed to encourage earnings retention for investment
Except for one of the following the constant dividend growth model is useful to corporate managers because: a. the required rate of return of shareholders is related to the company's level of risk as perceived by investors. b. the dividend stream is influenced by earnings and profitability as well as the dividend policy of management c. the growth rate is related to the efficiency of the company in generating returns on equity d. inflation calculations are incorporated in the model
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company’s stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 12.00% over the next year. After the next year, though, Portman’s dividend is expected to grow at a constant rate of 2.40% per year. Assuming that the market is in equilibrium, use the information just given to complete the table. Term Value Dividends one year from now (D₁) Horizon value (Pˆ1P̂1) Intrinsic value of Portman’s stock The risk-free rate (rRFrRF) is 3.00%, the market risk…
you are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay dividend. to help allay that fear, you compute the time-preferred-dividend-eraned ratio for the past three years from the following data taken from the firms financial statements. Year 20x1 20X2 20X3 Operating income $12,000,000 $15,000,000 $17,000,000 Interest 3,000,000 5,900,000 11,000,000 Taxes 4,000,000 5,400,000 4,000,000 Preferred dividends 1,000,000 1,000,000 1,500,00 Common dividends 3,000,000 2,000,00 - What does your analysis about the firm's capacity to pay preferred stock dividens?