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Good day Sir, i have a question as regards using the p/e ratio in valuing a business, i came across something that got me confused, what does it mean to adjust the p/e ratio downwards when valuing an unquoted company?
Share in an unquoted company are likely to have a lower price that shares in a quoted company (because unquoted shares will be harder for the purchaser to sell later if they want to – they need to find a buyer, whereas with quoted shares you can sell easily on a stock exchange).
Lowering the PE will result in a lower share price.
thank u sir, for the exam would we be required to do any calculation that involves lowering the p/e ratio in calculating the share price.
Not specifically (because there is no rule). But it is something you should mention in any written parts of a question.
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