One Approach to Valuing Target Companies for a Takeover Bid

question 29

True/False

One approach to valuing target companies for a takeover bid is to use a multiple of the target company's earnings per share and P/E ratio.

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Definitions:

Allowance Methods

Accounting techniques used to anticipate and account for future loan losses by establishing an allowance for doubtful accounts.

Bad Debt

Money owed to a company that is unlikely to be paid by the debtor, often leading to the creditor writing it off as a loss.

Percentage of Sales

A method used to forecast financial figures, such as net income or expenses, based on a percentage of the sales volume.

Dishonored

Refers to a check or promissory note that has been refused by the bank on which it was drawn because of insufficient funds or other reasons.