When summarizing multiples (e.g., EV/EBITDA) across a set of comparable firms, analysts typically prefer the median over the mean because:

Question

BlackTom AI · Accepted Answer

The median is robust to outlier firms that trade at extreme multiples in either direction.

Relevant concepts:
- Mean (arithmetic average) sums all observations and divides by count; it is sensitive to extreme values.
- Median is the middle value when observations are ordered; it is insensitive to magnitude of extreme observations and therefore more robust to skew and outliers.
- In valuation using comparable-company multiples (e.g., EV/EBITDA), extreme multiples from mispriced, distressed, or atypical firms can distort the mean, producing a misleading central tendency.

Step-by-step reasoning and demonstration:
1. Suppose five comparable firms have EV/EBITDA multiples of 6, 7, 8, 9, and 50 (one outlier).
2. Mean = (6 + 7 + 8 + 9 + 50) / 5 = 80 / 5 = 16.
3. Order the values: 6, 7, 8, 9, 50 → median = middle value = 8.
4. The mean (16) is pulled upward by the single extreme value 50 and therefore overstates a “typical” multiple. The median (8) reflects the central tendency of the majority of firms and is not affected by how extreme the outlier is.

Why the correct answer is correct:
- The median’s insensitivity to extreme high or low multiples makes it a preferred summary statistic in comparables analysis, where outliers are common due to differences in growth, profitability, accounting, or illiquidity.

Why the other options are incorrect:
- “The median is always lower than the mean” is false: whether median is lower or higher depends on skew; there is no universal ordering.
- “The mean cannot be computed when one comparable is privately held” is false: if a multiple is observable or estimable, the mean can be computed; private status does not inherently prevent arithmetic averaging.
- “The median is required by GAAP” is false: GAAP does not mandate the median for valuation summaries.

Conclusion:
The correct choice is the median’s robustness to outliers, which matches the provided answer.

When summarizing multiples (e.g., EV/EBITDA) across a set of comparable firms, analysts typically prefer the median over the mean because:单项选择题

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