New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Which of the following is most likely to identify

    stocks with high earnings growth rates?
    A Dividend payout ratio more than 30% Correct Answer Incorrect Answer
    B Price to cash flow per share ratio less than 12 Correct Answer Incorrect Answer
    C Book value to Market Value ratio less than 25% Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Firms that are growing will have high market value to their book value of equity. As such less book value to market value indicate growth stocks. Higher dividend payout ratio indicates firms with fewer growth opportunities as they not ploughing back their profits for additional investments in infrastructure and research and development. Low price to cash flow per share also indicates value stocks, not growth stocks.  

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