Which of the following two ratios are likely to be used for determining value as a function of company peer benchmarks? A. Return on equity and net profit margin. B. Price-to-earnings and price-to-book. C. Price-to-sales and debt/equity.
Relative valuation looks at market-based ratios of comparable companies in the industry. Price-to-sales, price-to-book, price-to-earnings, and price-to-cash flow are examples of ratios used in relative valuation analysis.
