2. Valuation Techniques

Relative Valuation — Quiz

Test your understanding of relative valuation with 5 practice questions.

Practice Questions

Question 1

Which of the following multiples is most appropriate for valuing a company with negative earnings but positive cash flow?

Question 2

When comparing two companies using the P/E ratio, if Company A has a P/E of $10x$ and Company B has a P/E of $15x$, and Company A is expected to grow its earnings at $10\%$ annually while Company B is expected to grow at $5\%$ annually, what might this suggest about Company A?

Question 3

What is the primary reason for using Enterprise Value (EV) multiples instead of Equity Value multiples (like P/E) when comparing companies with different levels of debt?

Question 4

When calculating the P/E ratio, what does the 'E' in 'Earnings' typically refer to?

Question 5

A company has a market capitalization of $200$ million, total debt of $50$ million, and cash and cash equivalents of $20$ million. Its EBITDA is $30$ million. What is its EV/EBITDA multiple?