Most Analysts Prefer Using Price to Free Cash Flow Rather

question 54

Multiple Choice

Most analysts prefer using price to free cash flow rather than price-to-earnings (P/E) ratio because price to free cash flow is:

• A)Easier to compute.
• B)More accurate than cash flow per share.
• C)A stricter measure that reduces the cash flow by the amount of capital expenditures.
• D)More reliable as a measure of performance.

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Definitions:

Interest Rate

This refers to the cost of borrowing money or the return earned on an investment, generally expressed as a yearly percentage.

Home Mortgage Loan

A loan used to purchase a residential property, secured by the home itself.

Monthly Payments

Regular payments made over a period, such as for loans or utilities, calculated on a monthly basis.

Down Payment

An initial upfront portion of the total amount due, typically associated with the purchase of expensive items like a home or car, which reduces the amount needed to be borrowed.