Qualitative Judgments and Consistency in Business Valuation

Sack Elmaleh Michael
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Sack Elmaleh Michael: Columbia Union College

Journal of Business Valuation and Economic Loss Analysis, 2009, vol. 4, issue 1, 17

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.

Keywords: subjectivity; qualitative judgments; measurement bias; measurement consistency; measurement precision (search for similar items in EconPapers)
Date: 2009
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DOI: 10.2202/1932-9156.1056

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