Financial Ratios Quiz

Calculate Wal-Mart Stores Inc.’s P/E Ratio as of November 14, 2017 when the company's stock price closed at $91.09. The company's profit for the U.S. tax year ended January 31, 2017 was $13.64 billion. The company’s number of shares outstanding is 3.1 billion.

What does this ratio represent and why might it be useful?

What does a P/E ratio of 20.70 indicate about future potential earnings in Walmart compared to past earnings in Walmart?

• $4.40: Future potential earnings in Walmart compared to past earnings in Walmart. May indicate growth opportunities and whether an investment in Walmart is worthwhile.

• 20.70: Future potential earnings in Walmart compared to past earnings in Walmart. May indicate growth opportunities and whether an investment in Walmart is worthwhile.

• $4.40: Future potential earnings in Walmart compared to future potential earnings for a competitor. May indicate that liquidity will be healthy in the future.

• 20.70: Future potential earnings in Walmart compared to future potential earnings for a competitor. May indicate that liquidity will be healthy in the future.

What is the Dividend yield for the following business? Next predicted dividend for an Ordinary Share £0.25 per share. Current trading price for an Ordinary Share £1.09.

• 12.62%

• 27.25%

• 22.94%

• None of the above

What might this signify to an investor if dividend yields are around 15% in this industry?

• Cash flows are healthy

• The business may be well placed to make good profits in the future which may reflect well in high dividends

• The dividend yield is better than the industry average

• None of the above

A business has taken out a new loan and taken a longer period of credit from suppliers. All other things being equal, how might this affect ratios?

• Effect on Gearing and Debt Ratios: Up, Effect on interest cover ratio: Down, Effect on Supplier Days Ratio: Up

• Effect on Gearing and Debt Ratios: Up, Effect on interest cover ratio: Up, Effect on Supplier Days Ratio: Down

• Effect on Gearing and Debt Ratios: Down, Effect on interest cover ratio: Down, Effect on Supplier Days Ratio: Down

• Effect on Gearing and Debt Ratios: None of the above, Effect on interest cover ratio: None of the above, Effect on Supplier Days Ratio: None of the above

Which of the following do we need to consider when evaluating ratios we have calculated?

• A. Wider factors such as technology changes: Yes, Industry factors such as a new competitor entering the industry: Yes, Factors relevant to a decision e.g. rent v. buy need to think about Operating Profit Margin: No, Changes over time: Yes, Other ratios: Yes

• B. Wider factors such as technology changes: Yes, Industry factors such as a new competitor entering the industry: Yes, Factors relevant to a decision e.g. rent v. buy need to think about Operating Profit Margin: Yes, Changes over time: No, Other ratios: No

• C. Wider factors such as technology changes: No, Industry factors such as a new competitor entering the industry: Yes, Factors relevant to a decision e.g. rent v. buy need to think about Operating Profit Margin: No, Changes over time: Yes, Other ratios: No

• D. Wider factors such as technology changes: Yes, Industry factors such as a new competitor entering the industry: Yes, Factors relevant to a decision e.g. rent v. buy need to think about Operating Profit Margin: Yes, Changes over time: Yes, Other ratios: Yes