You've now seen the three core approaches to business valuation: Asset, Market, and Income. Each tells a different story about a company's worth. Let's practice choosing the right lens for the right situation.
Engagement Message
Can you recall the main idea behind each approach?
Type
Sort Into Boxes
Practice Question
Match these key concepts to their primary valuation approach.
Labels
- First Box Label: Market Approach
- Second Box Label: Income Approach
First Box Items
- Comps
- Multiples
- Trading data
- Recent sales
Second Box Items
- Cash flow
- Discount rate
- Projections
- Time value
Type
Swipe Left or Right
Practice Question
For each business, which valuation approach is likely the most relevant? Swipe left for Asset/Market and right for Income.
Labels
- Left Label: Asset / Market
- Right Label: Income
Left Label Items
- A local pizza franchise
- A real estate holding company
- A used car dealership
- A chain of coffee shops
Right Label Items
- A subscription software company
- A utility company with long-term contracts
- A biotech firm with a patented drug
- A toll road with predictable traffic
Type
Fill In The Blanks
Markdown With Blanks
A comparable company sold for $50 million. It had earnings of $5 million, giving it an earnings multiple of [[blank:10x]].
Your company has earnings of $3 million. Applying the same multiple, your company's estimated value is [[blank:$30 million]].
Suggested Answers
- 10x
- $30 million
- 5x
- $15 million
Type
Multiple Choice
Practice Question
The Discounted Cash Flow (DCF) method is most sensitive to which two assumptions?
A. Historical revenue and current assets B. Future cash flow projections and the discount rate C. Market multiples and transaction comps D. Book value and liabilities
Suggested Answers
- A
- B - Correct
- C
- D
