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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 used your notes and passed ... highly recommended!
Lauren

Lauren

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.