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money helps an economy to avoid the need for a double coincidence of wants. In order to perform this role, money must be a store of value, i.e., a device that transfers and maintains value over time.
A measure of value (unit of account): Money provides a means to measure the relative values of different goods and services. For example, a piece of jewellery might be considered more valuable than a table because of the relative price, measured by money. Money also puts a value on labour.
What is relative valuation? n In relative valuation, the value of an asset is compared to the values assessed by the market for similar or comparable assets. n To do relative valuation then, • we need to identify comparable assets and obtain market values for these assets • convert these market values into standardized values , since the ...
In relative valuation, we value an asset based upon how similar assets are priced in the market. A prospective house buyer decides how much to pay for a house by looking at the prices paid for similar houses in the neighborhood.
Valuation applies the same definitions—“relative value” is the value of a security or asset determined by comparing the valuation metrics of other similar securities or assets. Analogously, similar securities or assets represent a “family” or “things with particular characteristics”—a common technical term is a “peer.”
The Essence of Relative Valuation (Pricing) ¨In relative valuation, the price of an asset is compared to the prices assessed by the market for similar or comparable assets. ¨To do relative valuation then, ¤we need to identify comparable assets and obtain market pricing for these assets
RELATIVE VALUATION In discounted cash flow valuation, the objective is to find the value of assets, given their cash flow, growth and risk characteristics. In relative valuation, the objective is to value assets, based upon how similar assets are currently priced in the market. While multiples are easy to use and intuitive, they are also easy ...
