Standardized Values and Multiples
When comparing identical assets, we can compare the prices of these assets. Thus, the price of a Tiffany lamp can be compared to the price at which an identical item was bought or sold in the market. However, comparing assets that are not exactly similar can be a challenge. If we have to compare the prices of two buildings of different sizes in the same location, the smaller building will look cheaper unless we control for the size difference by computing the price per square foot. Things get even messier when comparing publicly traded stocks across companies. After all, the price per share of a stock is a function of both the value of the equity in a company and the number of shares outstanding in the firm. ...
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