Why might two reputable valuations of the same business yield different results?

• A. Because financial statements are always perfect
• B. Because valuation involves assumptions, methods, and data quality
• C. Because the market price is fixed by law
• D. Because intangible assets cannot be valued

Answer: (B)

Valuation results can differ because valuing a business combines judgment about future performance, the method used, and the quality of the data feeding the model. Analysts may use different approaches (for example, a discounted cash flow model versus market-based multiples) and, within those methods, adopt different assumptions about growth, margins, capital needs, and risk. Small changes in inputs like the discount rate, terminal value, or normalization adjustments for one-time items can swing the final number a lot. Data quality also matters—financial statements include estimates and may require adjustments, and the way those adjustments are made varies between practitioners. The market price isn’t fixed by law, and even reputable valuations can diverge from current prices or from each other because these methods and inputs reflect varying expectations about the future. Intangible assets can be valued, though they’re tricky to quantify; the key idea is that valuation is inherently contingent on the chosen method, assumptions, and data.