The value of the comparable companies' method may vary widely depending upon when it is calculated in the business cycle.

Question

Quizplus · Accepted Answer

The value of comparable companies' method depends on the timing of the business cycle because the stock prices of comparable companies can fluctuate greatly depending on market conditions and investor sentiment. In times of economic expansion, companies may be valued higher than in times of recession, which would affect the accuracy and reliability of the comparable companies' method. Therefore, it is important to consider the current stage of the business cycle when using this valuation method.

The Value of the Comparable Companies' Method May Vary Widely