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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 ...
There are commonly three pillars to valuing business entities: comparable company analyses, discounted cash flow analysis, and precedent transaction analysis. Business valuation credentials include the Chartered Business Valuator (CBV) offered by the CBV Institute, ASA and CEIV from the American Society of Appraisers, and the CVA by the ...
Relative valuation also called valuation using multiples is the notion of comparing the price of an asset to the market value of similar assets. In the field of securities investment, the idea has led to important practical tools, which could presumably spot pricing anomalies.
Real Estate Valuation According to Standardized Methods: An Empirical Analysis (PDF). Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät. doi:10.18452/3501. (411 KiB) A study of the theoretical soundness and empirical accuracy of the German income approach (includes the valuation equations for the Ertragswertverfahren
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)