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Basic Question 4 of 5

The application of ______ depends on the quality of accounting disclosure and the degree of distortion.

A. Dividend discount model.
B. Free cash flow model.
C. Residual income model.
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User Contributed Comments 2

User Comment
ostrich Tricky!
MonkeySee Not Really, ostrich:
A) Discounts are fixed payments, especially past ones
B) Cash flow statments are difficult to manipulate
C) Net Income is based on many accounting assumptions!
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

compare dividends, free cash flow, and residual income as inputs to discounted cash flow models and identify investment situations for which each measure is suitable;

CFA® 2025 Level II Curriculum, Volume 3, Module 21.