n NISM Certifications
XV NISM Series XV
Medium

When a company has no operating profits, which valuation metric is most appropriate?

Practice question from NISM XV Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. EV to Sales Ratio

    Correct answer

  2. B

    Price to Dividend Ratio

  3. C

    Growth-adjusted P/E Ratio

  4. D

    Price to Earnings Ratio

Why this is the answer

When earnings are zero or negative, P/E is meaningless. EV/Sales is suitable because sales are typically positive, allowing valuation in absence of profits.

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