CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

All of the following are alternative definitions of cash flow used in price multiples, except:
A. Free cash flow to the firm (FCFF).
B. Net income plus noncash charges.
C. Earnings before interest, taxes, depreciation, and amortization (EBITDA).
Explanation: For A, FCFF is a measure of cash that is available to all capital providers.

User Contributed Comments 4

User Comment
RNAN Cash flow from operations is also an alternative definition.
volkovv The book specifically says that FCFF has a stronger link to valuation theory than does EBITDA, and can be used in EV multiple (EV/FCFF). All of the choices given are used in price multiples.
wollogo EBITDA is the only non-cash flow measure therefore the answer is D. And incidentally EBITDA is available to all capital holders as well.
Rotigga EBITDA is used in the EV/EBITDA multiple which is technically not a price multiple.
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