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B Com Exam  >  B Com Tests  >  Investing in Stock Markets  >  Test: Analysis of the Company - 2 - B Com MCQ

Test: Analysis of the Company - 2 - B Com MCQ


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10 Questions MCQ Test Investing in Stock Markets - Test: Analysis of the Company - 2

Test: Analysis of the Company - 2 for B Com 2024 is part of Investing in Stock Markets preparation. The Test: Analysis of the Company - 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Analysis of the Company - 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Analysis of the Company - 2 below.
Solutions of Test: Analysis of the Company - 2 questions in English are available as part of our Investing in Stock Markets for B Com & Test: Analysis of the Company - 2 solutions in Hindi for Investing in Stock Markets course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Analysis of the Company - 2 | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Investing in Stock Markets for B Com Exam | Download free PDF with solutions
Test: Analysis of the Company - 2 - Question 1
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What does the PEG ratio take into account when evaluating a stock's valuation?

Detailed Solution for Test: Analysis of the Company - 2 - Question 1
The PEG ratio combines the price-to-earnings ratio with the company's expected earnings growth rate to better express the valuation of growing companies. By considering the growth rate, the PEG ratio provides a more comprehensive view of a stock's valuation.
Test: Analysis of the Company - 2 - Question 2
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How is the PEG ratio calculated?

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The PEG ratio is calculated by dividing the price-to-earnings ratio by the company's expected earnings growth rate. This ratio helps investors assess the valuation of a stock relative to its growth prospects.
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Test: Analysis of the Company - 2 - Question 3
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What does a PEG ratio of less than 1 indicate?

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A PEG ratio of less than 1 is generally considered indicative of an undervalued stock. This means that the stock's price is relatively low compared to its expected earnings growth rate, and it may present a buying opportunity for investors.
Test: Analysis of the Company - 2 - Question 4
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What should investors consider when using the PEG ratio as part of their stock research process?
Detailed Solution for Test: Analysis of the Company - 2 - Question 4
Investors should consider that the PEG ratio makes assumptions that may or may not be valid. The projected earnings growth rate used in the calculation is based on analysts' estimates, which may not always accurately reflect future performance. Therefore, the PEG ratio should be used in conjunction with other metrics and factors when evaluating a stock's valuation.
Test: Analysis of the Company - 2 - Question 5
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What does the shareholding pattern reveal to investors?
Detailed Solution for Test: Analysis of the Company - 2 - Question 5
The shareholding pattern reveals the split of shares among different entities that make up the company's owners. This information can provide insights into the control and ownership structure of the company, as well as the confidence and participation of different shareholders, such as promoters and institutional investors.
Test: Analysis of the Company - 2 - Question 6
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What does a higher promoter stake indicate?
Detailed Solution for Test: Analysis of the Company - 2 - Question 6
A higher promoter stake is generally perceived as indicative of high confidence of promoters in their own company. When promoters increase their stake, it signals their optimism and belief in the future growth of the company. This is considered a positive sign for investors.
Test: Analysis of the Company - 2 - Question 7
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What does a higher FII stake indicate?
Detailed Solution for Test: Analysis of the Company - 2 - Question 7
A higher FII (Foreign Institutional Investors) stake is generally perceived as indicative of high confidence of FIIs in the company. When FIIs increase their stake, it shows their positive outlook and confidence in the company's future prospects. This is considered a positive sign for investors.
Test: Analysis of the Company - 2 - Question 8
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What does the price-to-sales ratio measure?
Detailed Solution for Test: Analysis of the Company - 2 - Question 8
The price-to-sales ratio measures a stock's relative valuation. It compares the price per share to the annual net sales per share to determine how much investors are willing to pay for each dollar of sales generated by the company. It is a useful metric for comparing the valuation of different stocks within the same industry.
Test: Analysis of the Company - 2 - Question 9
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Why is the price-to-sales ratio considered a reliable measure of valuation?
Detailed Solution for Test: Analysis of the Company - 2 - Question 9
The price-to-sales ratio is considered a reliable measure of valuation because sales figures are difficult to manipulate compared to other income statement items, such as earnings. While earnings can be influenced by accounting rules and adjustments, sales figures are typically more reliable indicators of a company's performance. However, it is important to analyze other factors and metrics in conjunction with the price-to-sales ratio to get a complete picture of a company's valuation.
Test: Analysis of the Company - 2 - Question 10
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What should investors be cautious about when analyzing the shareholding pattern?
Detailed Solution for Test: Analysis of the Company - 2 - Question 10
Investors should be cautious about relying solely on the shareholding pattern to evaluate a company. While the shareholding pattern provides valuable insights into the ownership structure and confidence of shareholders, it is just one piece of the puzzle. Other factors and metrics should also be considered to get a comprehensive understanding of a company's valuation and prospects.
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