Which of the following statements concerning the Price to Cash-Flow approach to stock valuation are true?
I. The Price to Cash-Flow method works just as well for non-dividend paying stocks as it does for dividend-paying stocks.
II. The Price to Cash-Flow calculate s the intrinsic value of a stock as the present value of future cash flows.
III. The Price to Cash-Flow ratio divides the market price of one share of stock by cash flow per share.
IV. The Price to Cash-Flow method should never be used to calculate the intrinsic value of a share.
A) I and III only
B) III and IV only
C) I, III and IV only
D) I, II and III only

Question

Quizplus · Accepted Answer

I. The Price to Cash-Flow method is indeed applicable to both dividend and non-dividend paying stocks because it focuses on the company's cash flow rather than its dividend payments. III. The Price to Cash-Flow ratio is correctly defined as dividing the market price of a share by the cash flow per share, providing a measure of the value investors are getting for each dollar of cash flow.

Which of the Following Statements Concerning the Price to Cash-Flow