CFA Practice Question
The P/S ratio is positively related to ______.
II. profit margin
III. required rate of return
IV. earnings growth rate
I. dividend payout ratio
II. profit margin
III. required rate of return
IV. earnings growth rate
Correct Answer: I, II and IV
P/S = Net Profit Margin (1 - b) (1 + g) / (r - g).
User Contributed Comments 3
| User | Comment |
|---|---|
| weiw | it is not clear that the divident payout ratio is positively related to P/S ratio if you put it into the mathematical way. Remeber 1-b still affects g. |
| sahilb7 | Shouldn't it be negatively correlated with r? |
| Omi1987 | if r goes up then P/S comes down. It is negatively correlated. |