What is the primary objective of a valuation model in finance?

To predict future stock prices To determine a company's profitability To assess the fair value of a company's stock To analyze market trends

Which valuation method relies on comparing companies with similar characteristics?

Absolute valuation Option-based valuation Relative valuation Intrinsic valuation

What is a key limitation of relative valuation?

It requires complex mathematical calculations It is not applicable to private companies It assumes the market correctly values the industry It is only useful for short-term investments

When is option-based valuation most appropriate?

When a company's value is heavily influenced by a specific event When a company has a stable and predictable cash flow When comparing companies in the same industry When analyzing historical stock performance

What are the three essential components of absolute valuation?

Cash flow, discount rate, timing of cash flow Market share, revenue growth, profitability Debt-to-equity ratio, current ratio, return on assets Customer acquisition cost, customer lifetime value, churn rate

What does 'Enterprise Value' represent in absolute valuation?

The value of the company's assets The value of the company's equity The company's projected future earnings The company's market capitalization

What is the 'Weighted Average Cost of Capital' (WACC)?

The average return expected by debt holders The average return expected by equity holders The blended discount rate reflecting both debt and equity expectations The risk-free rate of return