Handbook of Business Valuation

By Thomas L. West; Jeffrey D. Jones | Go to book overview

CHAPTER FIFTEEN
The Market Approach Using
Public Company Data

MARY B. McCARTER KATHRYN F. ASCHWALD

The market approach using public company data is a market-based approach, whereby we estimate the price that would be paid for the common stock of a closely held company, if its common stock were traded in an active market or over an exchange. We do this by analyzing the market ratios of stocks of publicly traded companies that operate in the same industry as the company we are appraising (the subject company), because these companies have the most similar risk profiles and growth prospects to the subject company. To the extent that the risk factors and growth prospects of an investment in the subject company's common stock are different from those of the similar publicly traded company group, the appraiser will make subjective adjustments to the market ratios to reflect these differences. This will be discussed in more detail later.

Revenue Ruling 59-60 specifically states that of the eight factors that “Are fundamental and require careful analysis in each case” for gift and estate tax valuations, is “the market price of stocks of corporations engaged in the same or similar line of business having their stocks actively traded on a free and open market, either on an exchange or over the counter.“1 The valuation guidelines of Revenue Ruling 59-60 were also embraced by the Department of Labor (DOL) in the proposed valuation guidelines it issued governing ESOP valuations.2 In addition, this approach is widely recognized and commonly used in valuing closely held companies. Therefore, the business appraiser needs to consider the public company market approach in all

-197-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Handbook of Business Valuation
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 592

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.