When using the multiples analysis approach to valuing a business, one must be aware:

Question

Quizplus · Accepted Answer

When using a multiples analysis approach to valuing a business, one must be aware of the presence of a marketability discount that can be sizable. This is because the multiples analysis approach involves comparing the financial performance of the company being valued to similar companies whose shares are publicly traded, and the lack of marketability of a private company can lead to a lower valuation multiple being applied. It is important to account for this discount in order to get an accurate valuation of the business. Options A, B, and C are incorrect because they do not accurately describe factors to be aware of in a multiples analysis approach.

When Using the Multiples Analysis Approach to Valuing a Business