Series 79 practice questioneasyComparable Company Analysis
Which of the following is most important to ensure when selecting peers for a comparable company analysis?
- AChoosing companies with the largest market capitalizations
- BSelecting companies with similar business models and operating characteristics✓ Correct answer
- CUsing only companies within the same country
- DFocusing on companies with the highest revenue growth
Explanation
Why B — Selecting companies with similar business models and operating characteristics
Peer group comparability is driven by business models and operating profiles, not just size or geography. Using similar companies ensures relevant valuation multiples, while focusing on size or geography alone may introduce distortions.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Collection, Analysis & Evaluation of Data questions
- A banker adjusts the purchase price in a precedent transaction to account for the value of net debt at closing. What is…
- A company funds a large special dividend by issuing new debt. Which of the following is a likely result?
- When calculating enterprise value, which adjustment should be made to equity value?
- When calculating the WACC for a U.S.-based multinational with significant foreign operations, which of the following…
- A comparable company analysis peer group contains a company with an unusually low EV/EBITDA multiple due to recent…
- A company’s pro forma debt/EBITDA ratio increases from 2.0x to 5.0x after a leveraged recapitalization. Which of the…
- If a precedent transaction was announced during a period of elevated market volatility, which of the following is the…
- An analyst is performing a DCF valuation and mistakenly uses book value weights instead of market value weights for…