accounting conservatism in mutliples

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

accounting conservatism in mutliples

Postby deepakkrkanodia » Thu Nov 29, 2012 1:58 pm

Q. The issue of differences in accounting conservatism between companies is best addressed when companies are compared using which of the following ratios?

A. Price-to-earnings
B. Price-to-cash flow
C. Price-to-book value

Query: Please explain what does this question mean with any numeric example relating all mutliples.

Tags:

pankaj
Finance Junkie
Posts: 61
Joined: Fri Aug 03, 2012 11:24 am

Re: accounting conservatism in mutliples

Postby pankaj » Thu Nov 29, 2012 7:06 pm

This question does not need any numeric example to solve.
Just remember earning and book value can be manipulated by applying different accounting practices.

The price-to-cash-flow ratio can allow investors to assess companies from the same industry with a bit more ease because price-to-cash flow measure deals with cash flow therefore the effects of depreciation and other non-cash factors are removed.

Hope this help!

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

Re: accounting conservatism in mutliples

Postby deepakkrkanodia » Fri Nov 30, 2012 11:07 pm

pankaj

thx

regards


deepak


Return to “CFA Level I”



cron

Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.