Market approach

Valuing a business from the prices of comparable listed companies or of past acquisitions of similar companies, adjusted for differences in size, growth, risk and control.

Where you will meet it

Market approach appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain the asset-based, market and income ways of valuing a private firm and what bears on choosing each one
  CFA Level II · Equities

  “The market approach uses prices of comparable public companies or of past acquisitions, and suits businesses with good comparables.”

• Value a private firm using methods based on the market and set out the pros and cons of each method
  CFA Level II · Equities

  “Market approaches use prices from other companies.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with M · Glossary