Which of the following statements is FALSE? A It is common practice to use valua

Question

Which of the following statements is FALSE? A It is common practice to use valuation multiples based on a firm?s enterprise value. B. Using a valuation multiple based on comparables is best viewed as a shortcut to the discounted cash flow method of valuation. C. We can compute a firm?s price - earnings ratio by using either trailing earnings or forward earnings with the resulting ratio called the trailing price - earnings or forward price - earnings, D. As the enterprise value represents the entire value of a firm before the firm pays its debt, to form an appropriate multiple, we divide it by a measure of earnings or cash flows after interest payments are made.

Explanation / Answer

The enterprise valuation methods are used to value equity market capitalization of an enterprise. In other words, it is an attempt to estimate per share price of stock. In the given problem all facts are true in reference of enterprise valuation. Thus, none of the given statements are false.

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