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Qualitative Judgments and Consistency in Business Valuation

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  • Sack Elmaleh Michael

    (Columbia Union College)

Abstract

Qualitative judgments are an integral part of business valuation practice. These judgments are often viewed with suspicion as being "subjective" and more prone to bias than quantitative procedures. These judgments are not subjective and not necessarily biased. However, qualitative judgments are often a source of bias and their abuse can and often does lead to wildly inconsistent results in actual practice.The solution to this problem is not the elimination of qualitative judgments. This is neither desirable nor possible. Two approaches to the treatment of qualitative judgments may reduce their misuse: first, judicious limiting of acceptable choices in making particular judgments and second, the breaking down of large qualitative judgments into smaller components by wider use of ordinal scale.

Suggested Citation

  • Sack Elmaleh Michael, 2009. "Qualitative Judgments and Consistency in Business Valuation," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(1), pages 1-17, October.
    • Handle: RePEc:bpj:jbvela:v:4:y:2009:i:1:n:6
    DOI: 10.2202/1932-9156.1056
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    Cited by:

    1. Olbrich Michael & Quill Tobias & J. Rapp David, 2015. "Business Valuation Inspired by the Austrian School," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 10(1), pages 1-43, January.
    2. Lewin Peter, 2017. "Capital Valuation, What is it and Why does it Matter? Insights from Austrian Capital Theory," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 12(s1), pages 1-19, July.

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