What is dividing the price-per-share ratio by the cash-flow-per-share ratio used to calculate __________?
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Answer: D. price to cash flow ratio
Explanation
The price to cash flow ratio compares a company share price directly to its operating cash flow. Dividing price per share by cash flow per share calculates this valuation metric accurately. This ratio helps investors determine whether a stock is overvalued or undervalued relative to cash generation. Price per share represents the current market trading value of a single share of stock. Cash flow per share measures the total cash generated by the firm divided by shares outstanding. Valuation ratios are essential tools used in fundamental equity analysis and portfolio management.
Value investors prefer cash flow metrics over earnings because cash cannot be easily manipulated by accruals. Comparing price to cash flow across industry peers reveals which companies generate superior operational returns. Portfolio managers screen for low price to cash flow stocks to identify potential bargain opportunities. Dividend to stock ratio measures dividend payouts relative to share price rather than cash generation. Sales to growth ratio evaluates revenue expansion rates rather than per share valuation multiples. Cash flow to price ratio inverts the standard valuation metric by placing cash flow in the numerator.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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