CFA Level 1 Exam

3959 Questions

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Question No. 1

The price/cash flow ratio is used to supplement the P/E ratio in company analysis because:

I. A firm's cash flow is typically subject to less accounting manipulation than reported earnings,
II. Cash flow has become an important measure of performance, value and financial strength because
numerous academic studies have shown that various cash flow measures can be used to predict both success and future problems
III. Under theoretically ideal conditions, the market value of a firm should reflect its book value
IV. Cash flow data have become more accessible
V. It is easier to compute
Choose the correct option from the given list.
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