The Valuation Method That Is Commonly Used,but Tends to Oversimplify

question 23

Multiple Choice

The valuation method that is commonly used,but tends to oversimplify the valuation process,is called:

• A)the excess-earnings method.
• B)the balance sheet method.
• C)the capitalization method.
• D)the market approach.

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Definitions:

Systematic Risk

The peril present throughout an entire market or a portion of the market that cannot be alleviated by spreading investments.

Non-diversifiable Risk

The portion of an investment's risk that cannot be eliminated through diversification, related to factors affecting the entire market.

Unsystematic Risk

A type of risk that affects a small number of assets, often referred to as "specific risk," and is related to issues like management performance or consumer preferences.

Marketplace

A venue for buying and selling goods, services, or financial instruments, which can be physical or virtual.