For each of the following descriptions of company characteristics, enter the nam

Question

For each of the following descriptions of company characteristics, enter the name of the variable (method or benchmark or multiple) for Relative Valuation that would work best for a company with those characteristics. An example of a variable would be EBITDA. a. Firms whose balance sheet fairly reflects the value of their assets and liabilities. b. Firms with significant non-cash expenses. c. Firms with stable prospects for future growth and similar capital structures. d. Firms with established positive earnings and no significant noncash expenditures. e. Firms with stable growth and thus predictable capital expenditures. f. Young firms, start-ups and firms with negative earnings and/or cash flow.

Explanation / Answer

Particulars Name of Variable a. Firms whose balance sheet fairly reflects the value of their assets and liabilities. Book value or replacement values b. Firms with significant non-cash expenses. Net Income c. Firms with stable prospects for future growth and similar capital structures. PE ratio d. Firms with established positive earnings and no significant noncash expenditures. PE ratio e. Firms with stable growth and thus predictable capital expenditures. Value of equity f. Young firms, start-ups and firms with negative earnings and/or cash flow. EBITDA

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