Question #127 - Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples

Reading: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples

PDF File: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples.pdf

Page: 46

Status: Unattempted

Correct Answer: C

Shared Context

- Using the cash flow statement approach calculate the aggregate accruals ratio: A) 11.5%. B) 5.7%. C) 10.2%.

Question

Regarding the Cery's comments on enterprise value multiples which are most likely correct: Comment 1 Comment 2

Answer Choices:

A. Correct Correct

B. Correct Incorrect

C. Incorrect Incorrect

Explanation

Since FCFF captures the amount of capital expenditures, it is more strongly linked with valuation theory than EBITDA. EBITDA will be an adequate measure if capital expenses equal depreciation expenses and working capital remains relatively constant.

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