What Are Some Implicit Assumptions That Are Made When Valuing

question 59

Essay

What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?

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Definitions:

Legal Cartel Theory

The concept that certain regulatory frameworks or practices can create conditions similar to a cartel, affecting competition and prices.

Government Regulation

The laws and rules established by government bodies to control and guide the activities of businesses and individuals.

Herfindahl Index

A measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry.

Market Share

The proportion of total sales or business a company secures within a particular market, compared to its competitors.