The Use of Price-to-Revenue Ratios in Valuing Sports Franchises

There are many approaches used to value an asset or business. They can all be categorized into one of the following three conceptually distinct methods. One method, the market approach, relies on what similar assets sell for in the marketplace. A second method, the income approach, uses income or cash flow as the basis for the value of the business or asset. The third method, the cost or asset approach, determines what it would cost to recreate the business or asset. Some businesses are more readily valued using certain approaches, whereas others may be valued using all three approaches. Sports franchises typically lend themselves to being valued using the market approach