Series 79 practice questionmediumComparable Company Analysis
How should outlier multiples be handled when calculating median multiples for a peer group?
- AUse the mean instead of the median
- BAlways exclude them
- CEvaluate the underlying reasons before deciding whether to exclude or adjust✓ Correct answer
- DAutomatically cap all multiples
Explanation
Why C — Evaluate the underlying reasons before deciding whether to exclude or adjust
It’s important to evaluate why the outlier exists before excluding or adjusting it, as arbitrary removal can bias results. Relying solely on statistical rules without context can produce misleading multiples.
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