Question

Given the "noise" in earnings per share, Free Cash Flow may be a better measure of...

Given the "noise" in earnings per share, Free Cash Flow may be a better measure of firm performance.

True OR False

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

True.

Earnings per share (Net Income / Shares O/s) does consider few things like interest(Which is fixed) and depreciation(Non Cash Expense) in its calculation of net income which doesn't provide accurate picture business performance. in FCF method of valuing a firm , Depreciation will be added back and interest payment on debt are treated as payment to debt holders while calculating 'Value of firm. thus i would say FCF Valuation is better measure than EPS valuation

Please upvote if satisfied

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Free cash flow is the measure of operating cash flow available for corporate purposes after providing...
Free cash flow is the measure of operating cash flow available for corporate purposes after providing significient fixed asset additions to maintain current productive capacity true are false
Please calculate the price per share using the free cash flow model given the following: You...
Please calculate the price per share using the free cash flow model given the following: You are analyzing Ola Enterprises, a small manufacturing firm. The firm does not pay a dividend, but they've been in existence for 7 years now. The future growth rate is estimated to be 4%. Their weighted average cost of capital is 7.50% and the company has $700,000 in debt. Additionally, the company has 100,000 outstanding shares of common stock. There annual free cash flows are...
Why is before tax cash flow (BTCF) a better measure of investor cash flow than net...
Why is before tax cash flow (BTCF) a better measure of investor cash flow than net operating income (NOI)?
22. Consider the Free Cash Flow Equation, what happens to Free Cash Flow if the tax...
22. Consider the Free Cash Flow Equation, what happens to Free Cash Flow if the tax rate increases, holding all else constant? It decreases, increases, there is no change, 20. True/False An investor can get rid of all systematic risk by diversifying their portfolio 19. True/False Consider the WACC formula, if the required rate of return on preferred stock increases, holding all else equal, the WACC increases. 18. TRUE/FALSE Sinking funds provisions allow companies to retire bonds on an orderly...
Answer true or false to the following questions relating to the free cash flow hypothesis. a....
Answer true or false to the following questions relating to the free cash flow hypothesis. a. Companies with high operating earnings have high free cash flows. b. Companies with large capital expenditures, relative to earnings, have low free cash flows. c. Companies that commit to paying a large portion of their free cash flow as dividends do not need debt to add discipline. d. The free cash flow hypothesis for borrowing money makes more sense for firms in which there...
EPS (earnings per share) is not required to be reported in the income statement but is...
EPS (earnings per share) is not required to be reported in the income statement but is optional. a. True b. False 2. Companies report earnings per share for preferred stock, too. a. true b. False 3. Leases similar to installment purchases are capitalized. True False
8b. If long-run free-cash-flow growth is 6% and free cash flow in 2023 is $108.4, what...
8b. If long-run free-cash-flow growth is 6% and free cash flow in 2023 is $108.4, what is the expected free cash flow in 2024? (page 338) Free cash flow in 2023 $                108.4 Long-run free cash flow growth 6% Free cash flow in 2024 (Solution: $114.9) 8c. What is the horizon value at 2023 given the FCF in 2024, the long-term growth rate of 6%, and a weighted average cost of capital of 10%? (page 338) Weighted average cost of...
How is Free Cash Flow computed and what does free cash flow represent to the firm?
How is Free Cash Flow computed and what does free cash flow represent to the firm?
Compare free cash flow to net increase in cash on the statement of cash flows. Is...
Compare free cash flow to net increase in cash on the statement of cash flows. Is it better to have a positive free cash flow or a negative free cash flow? Why?
Problem 2-34 Free Cash Flow (LG-5) The 2021 income statement for Egyptian Noise Blasters shows that...
Problem 2-34 Free Cash Flow (LG-5) The 2021 income statement for Egyptian Noise Blasters shows that depreciation expense is $83 million, NOPAT is $248 million. At the end of the year, the balance of gross fixed assets was $665 million. The change in net operating working capital during the year was $73 million. Egyptian’s free cash flow for the year was $195 million. Calculate the beginning-of-year balance for gross fixed assets
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT