Which of the following approaches is a valuation relative to financial performance measure?
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A. B. C. D.A
The correct answer to this question is B. Multiple of earning approach.
The multiple of earning approach is a valuation method that uses financial performance measures, specifically earnings, to determine the value of a company. This approach involves multiplying a company's earnings by a certain factor, which varies depending on the industry and other factors, to arrive at a valuation.
For example, if a company has annual earnings of $1 million and the industry average multiple is 10, the company would be valued at $10 million using the multiple of earning approach. This approach is commonly used in the valuation of publicly traded companies, where the earnings are readily available and the industry multiples are well established.
The present value approach, on the other hand, is a valuation method that involves discounting the future cash flows of a company to their present value. This approach takes into account the time value of money and the risk associated with the future cash flows. It is commonly used in the valuation of private companies, where the future cash flows are more uncertain and the industry multiples may not be applicable.
The communicative approach and the integrated eclectic approach are not commonly used valuation methods, and are not related to financial performance measures. The communicative approach is a method of communication that focuses on understanding the perspective and intentions of the parties involved, while the integrated eclectic approach is a psychological therapy that combines different therapeutic approaches.
In summary, the multiple of earning approach is a valuation relative to financial performance measure, as it uses earnings to arrive at a company's valuation.