Relative valuation methods are often described as market-based, as they reflect the amounts investors are willing to pay for each dollar of earnings, cash flow, sales, or book value at a moment in time.

Question

Quizplus · Accepted Answer

Relative valuation methods use market-based measures such as price-to-earnings ratios, price-to-sales ratios, price-to-cash flow ratios, and price-to-book value ratios to compare the value of different companies or securities based on what investors are willing to pay.

Relative Valuation Methods Are Often Described as Market-Based, as They