Relative valuation has several disadvantages. Which of the following is NOT? a. There is the potential to provide inconsistent estimates arising from using different price ratios. b.Relative valuation is affected by the market mood such as when the comps is overvalued, the resulting valuation of the object will be a lower estimate. c. When applying relative valuation, the analyst may remove nonrecurrring income and loss items such as loss from sale of a cash-generating unit; this will improve the valuation process at the expense of time required. d.When biased stock brokers prepare relative valuation reports, it is likely that they will choose a price ratio that will encourage investors to buy stocks.
Relative valuation has several disadvantages. Which of the following is NOT? a. There is the potential to provide inconsistent estimates arising from using different price ratios. b.Relative valuation is affected by the market mood such as when the comps is overvalued, the resulting valuation of the object will be a lower estimate. c. When applying relative valuation, the analyst may remove nonrecurrring income and loss items such as loss from sale of a cash-generating unit; this will improve the valuation process at the expense of time required. d.When biased stock brokers prepare relative valuation reports, it is likely that they will choose a price ratio that will encourage investors to buy stocks.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Relative valuation has several disadvantages. Which of the following is NOT?
a. There is the potential to provide inconsistent estimates arising from using different price ratios.
b.Relative valuation is affected by the market mood such as when the comps is overvalued, the resulting valuation of the object will be a lower estimate.
c. When applying relative valuation, the analyst may remove nonrecurrring income and loss items such as loss from sale of a cash-generating unit; this will improve the valuation process at the expense of time required.
d.When biased stock brokers prepare relative valuation reports, it is likely that they will choose a price ratio that will encourage investors to buy stocks.
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