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Basic Question 0 of 12
If a company is not dividend-paying, we can use ______ to define its cash flows.
II. free cash flow model
III. residual income model
I. dividend discount model
II. free cash flow model
III. residual income model
User Contributed Comments 4
| User | Comment |
|---|---|
| loo101 | residual income model helps to assess the value of a company. but is it really used to define its cash flows? |
| danlan2 | I think only II is right. |
| noonah | III is also right. It follows the broader definition of cash flows in the context of value appraisal of a business. |
| rhardin | Quote from page 304 of the CFA Institute material: "Can the DDM be applied to non-dividend-paying shares? In theory it can, as is illustrated later, but in practice it generally is not." So my take away is yes, it CAN, though probably shouldn't. |
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Learning Outcome Statements
describe general principles of expense recognition, specific expense recognition applications, implications of expense recognition choices for financial analysis and contrast costs that are capitalized versus those that are expensed in the period in which they are incurred
CFA® 2025 Level I Curriculum, Volume 2, Module 2.