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:

Standard Deviation

A gauge for the level of dispersion or spread within a set of data points, indicating the magnitude of deviation from the mean.

Standard Normal Distribution

A specific type of normal distribution with a mean of 0 and a standard deviation of 1, used in many areas of statistical analysis.

Mean

The arithmetic average of a set of values, calculated by adding them together and dividing by the number of terms.

Normal Distribution

It's a probability distribution with symmetry about the mean, proving that data points near the mean have a higher frequency of occurrence compared to those further away.