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It was well understood in the 1800s and widely used by U.S. courts during the 20th century, although it has recently declined as Discounted Cash Flow and more direct market-based methods have become more popular. "Comparable company analysis", closely related, was introduced by economists [citation needed] at Harvard Business School in the 1930s.
Comparable transactions, in the context of mergers and acquisitions (M&A), is one of the conventional methods to value a company for sale. The main approach of the method is to look at similar or comparable transactions where the acquisition target has a similar business model and similar client base to the company being evaluated.
Multiplying actual financial results against a comparable valuation multiple often yields a value for the company that is objectively too low given the prospects for the business. Often the First Chicago method may be preferable to a discounted cash flow taken alone. This is because such income-based business value assessment may lack the ...
The financial statement analysis generally involves common size analysis, ratio analysis (liquidity, turnover, profitability, etc.), trend analysis and industry comparative analysis. This permits the valuation analyst to compare the subject company to other businesses in the same or similar industry, and to discover trends affecting the company ...
In finance, valuation analysis is required for many reasons including tax assessment, wills and estates, divorce settlements, business analysis, and basic bookkeeping and accounting. Since the value of things fluctuates over time, valuations are as of a specific date like the end of the accounting quarter or year.
The pitch book may employ a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). "Comps", or Comparable Company Analysis may also be presented. In a comp, an investment bank presents industry specific details, trends, macro- and microeconomic and company specific analyses, which support reasoning for a particular valuation. (Comp ...
Financial analyst generally, and esp. § Qualification, discussing various investment, banking, and corporate roles (i.e. financial management, corporate finance, investment banking, securities analysis & valuation, portfolio & investment management, credit analysis, working capital & treasury management; see Financial modeling § Accounting)
Valuation using multiples From an alternative name : This is a redirect from a title that is another name or identity such as an alter ego, a nickname, or a synonym of the target, or of a name associated with the target.