OTHER NON DCF VALUATION MODEL
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Business and Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the Book Value method of valuation and how is it calculated?
Book Value method values a company based on its net assets, calculated as Total Assets minus Total Liabilities (i.e., shareholders' equity) as appearing in the balance sheet.
What is the Asset-Based Valuation approach and when is it primarily used?
Values firm by summing net assets; used in asset-heavy industries.
Why is Book Value considered an unreliable standalone valuation method for mergers?
Book Value uses historical cost and ignores intangible assets, goodwill, and market realities, making it unsuitable for capturing true economic worth in M&A transactions.
What is the Price-to-Book Value (P/BV) multiple and what does a high ratio indicate?
Market price divided by book value per share; high ratio means market premium over assets.
What is the Price-to-Book (P/B) ratio and how is it used in valuation?
P/B ratio compares a company's market price per share to its book value per share; a P/B above 1 suggests the market values the firm above its accounting net worth, indicating intangible value or growth prospects.
What is the Earnings Per Share (EPS) and how is it used in market multiple valuation?
Net profit divided by shares outstanding; multiplied by P/E to derive share value.
What does the Liquidation Value method represent in non-DCF valuation?
Liquidation Value is the estimated net amount realizable if all assets are sold and liabilities paid off in a forced or orderly wind-down, representing the floor value of the enterprise.
What is the EV/EBIT multiple and how does it differ from EV/EBITDA?
EV divided by EBIT excludes depreciation effect, reflecting operating profit before tax.
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