If a company has price $30 per share and sales per share of $2, what is the price-to-sales (P/S) ratio?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If a company has price $30 per share and sales per share of $2, what is the price-to-sales (P/S) ratio?

Explanation:
The price-to-sales ratio shows how much investors are willing to pay for each dollar of a company’s sales. It’s calculated by dividing the price per share by the sales per share. Here, 30 divided by 2 equals 15, so the P/S ratio is 15. This means investors are valuing each dollar of sales at 15 dollars, i.e., a 15x sales multiple. This metric helps compare valuations across companies, especially when profits are uneven or seasonal; a higher P/S suggests a higher valuation relative to sales, while a lower one suggests the opposite—always consider growth prospects and margins when interpreting it.

The price-to-sales ratio shows how much investors are willing to pay for each dollar of a company’s sales. It’s calculated by dividing the price per share by the sales per share. Here, 30 divided by 2 equals 15, so the P/S ratio is 15. This means investors are valuing each dollar of sales at 15 dollars, i.e., a 15x sales multiple. This metric helps compare valuations across companies, especially when profits are uneven or seasonal; a higher P/S suggests a higher valuation relative to sales, while a lower one suggests the opposite—always consider growth prospects and margins when interpreting it.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy