Which of the following statements regarding comparable companies is (are) correct?Select one or more alternatives.We can regress valuation multiples on firm fundamentals to adjust for the difference in firm fundamentals.If we choose to use the EV/Sales multiple, a perfect comparable company must have identical historical after-tax operating margin, historical reinvestment rate, weighted-average cost of capital and historical growth rate.If we choose to use the EV/Sales multiple, a perfect comparable company must have identical expected after-tax operating margin, expected reinvestment rate, weighted-average cost of capital and expected growth rate.If we limit comparable companies to the same industry, we might end up with too few comparable companies.

What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?a.Industry is correctly valued.b.Same growth rates.c.Comparable firms have similar future prospects.d.No fundamental differences between firms.e.All of them.

All of the following are reasons why comparable companies analysis should be used in conjunction with other valuation methodologies EXCEPT: A. Markets may be skewed due to investor sentiment B. No two companies are the same C. Valuation methods may vary by sector D. Intrinsic valuation may be needed

Analyse the Performance of a CompanyThe following data is available for two companies A and B:Company A Metric  Previous Year (Amount in $ million)Current Year (Amount in $ million)Sales revenue500 425 Cost of goods sold260 320 Variable Margin240 105 Fixed cost25 25         Company BMetric Previous Year (Amount in $ million)Current Year (Amount in $ million)Sales revenue300 195 Cost of goods sold110 115 Variable Margin190 80 Fixed cost15 15         Based on the given data, which of the following statements is true?Company A has significantly performed better than company B because it has a higher variable margin for the given two years.The absolute variable margins of the two companies are not directly comparable.Company B has a much better operating performance as it has a lower fixed cost than company A.

Multiple Choice QuestionCompany A has a return on investment of 20% and Company B has a return on investment of 24%. Assuming both companies have the same investment center average assets, which of the following statements is true?Multiple choice question.Company A has higher investment center income than Company B.Company B is more efficient in using its assets to generate profits.Company B has higher return on investment than Company A.Company A is more efficient in using its assets to generate profits.

Which of the following statements is FALSE?a.The most common valuation multiple is the price-earnings (P/E) ratio.b.The intuition behind the use of the P/E ratio is that when you buy a stock, you are in a sense buying the rights to the firm's future earnings and differences in the scale of the firms' earnings are likely to persist.c.A firm's P/E ratio is equal to the share price divided by its earnings per share.d.None of them.e.You should be willing to pay proportionally more for a stock with lower current earnings.