Question #23
Reading: Reading 19 Equity Valuation - Applications and Processes
PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf
Page: 9
Status: Correct
Correct Answer: B
Question
Which of the following two ratios are likely to be used for determining value as a function of company peer benchmarks?
Answer Choices:
A. Return on equity and net profit margin
B. Price-to-sales and debt/equity
C. Price-to-earnings and price-to-book
Explanation
Relative valuation looks at market-based ratios of comparable companies in the industry.
Price-to-sales, price-to-book, price-to-earnings, and price-to-cash flow are examples of
ratios used in relative valuation analysis.