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.

Question

Quizplus · Accepted Answer

Price to free cash flow is a stricter measure than P/E ratio because it takes into account the cash flow that is available to shareholders after capital expenditures. This is important because companies need to invest in their business to grow and remain competitive. Therefore, price to free cash flow provides a more reliable measure of a company's performance. Additionally, it is relatively easy to compute, making it a popular metric among analysts.

Most Analysts Prefer Using Price to Free Cash Flow Rather