Basics of Financial Statements
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Questions and Answers

What is the primary focus of Absolute Valuations?

  • Historical performance
  • Market trends and sentiments
  • Fundamental analysis (correct)
  • Technical analysis

In the context of Valuation Matrices, what does the term 'Assets based Valuation' refer to?

  • Valuing a company based on its market capitalization
  • Valuing a company based on its intellectual property
  • Valuing a company based on its tangible and intangible assets (correct)
  • Valuing a company based on its revenue generation potential

What distinguishes Relative Valuations from Absolute Valuations?

  • Relative Valuations involve benchmarking against industry peers (correct)
  • Relative Valuations focus on future growth potential
  • Relative Valuations consider only internal financial metrics
  • Relative Valuations rely solely on historical performance

What is the main objective of Sum-Of-The-Parts (SOTP) Valuation?

<p>To break down a company's valuation into different business segments (A)</p> Signup and view all the answers

Which valuation method is primarily concerned with analyzing a company's future earnings potential?

<p>Earnings Based Valuation Matrices (B)</p> Signup and view all the answers

In the context of business valuation, what does 'Trading Multiples' refer to?

<p>Valuing a company based on multiples of its operating metrics (C)</p> Signup and view all the answers

What key factor distinguishes Assets based Valuation from Earnings Based Valuation Matrices?

<p>Earnings Based Valuation considers future cash flows, while Assets based Valuation considers historical performance. (D)</p> Signup and view all the answers

Why is it important to consider Trading Multiples in relative valuations?

<p>To assess a company's operational efficiency compared to competitors (D)</p> Signup and view all the answers

Which factor is NOT typically considered in Sum-Of-The-Parts (SOTP) valuation?

<p>Company's operational efficiency (C)</p> Signup and view all the answers

When comparing two companies using Trading Multiples, which ratio is commonly used for valuation?

<p>Price-Earnings Ratio (P/E ratio) (A)</p> Signup and view all the answers

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