Question #10
Reading: Reading 19 Equity Valuation - Applications and Processes
PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf
Page: 5
Status: Correct
Correct Answer: A
Question
A valuation of a firm based on a review of other firms' price to earnings, price to sales, and price to return on investment ratios is an example of a:
Answer Choices:
A. relative valuation
B. broad-based valuation
C. fundamental valuation
Explanation
An approach using market multiples to establish the value of the subject firm in relation to
similar firms is an example of a relative valuation approach.