One way to value a business is to ________. In general, the business should sell for 3 to 5 times its annual net earnings.
A) look at a multiple of its net earnings
B) look at a comparison with similar businesses
C) use an appropriate benchmark
D) look at a professional appraisal

Question

Quizplus · Accepted Answer

Using a multiple of net earnings is a common and straightforward way to value a business. The suggested range of 3 to 5 times annual net earnings is a general rule of thumb, but the multiple may vary depending on the industry and other factors. Looking at a comparison with similar businesses, using an appropriate benchmark, and obtaining a professional appraisal may also be helpful in determining the value of a business, but they are not the specific method mentioned in the question.

One Way to Value a Business Is to ________