The comparable recent transactions method is usually considered less reliable than the comparable companies' valuation method.

Question

Quizplus · Accepted Answer

The comparable recent transactions method involves analyzing the prices paid in recent mergers and acquisitions of similar companies, which can provide valuable insight into the current market conditions and the potential value of a target company. While it may have some disadvantages such as difficulty in finding truly comparable transactions, it is still considered a reliable valuation method. In comparison, the comparable companies' valuation method involves comparing a company's financial ratios and multiples to those of similar publicly traded companies, which may not always provide an accurate picture of a target company's unique characteristics and potential for growth.

The Comparable Recent Transactions Method Is Usually Considered Less Reliable