INTRODUCTION TO BUSINESS VALUATION CHAPTER 1 QUESTIONS AND
ASWERS A+ GRADED. Buy Quality Materials!
Primary opportunities for the valuation analyst can be found in working with:
a. Business owners, investors , attorneys, and individuals performing valuations
for a variety of reasons, including estate planning and taxation, litigation support,
mergers and acquisitions, and financial statement reporting.
b. Business owners as only the owner of a business can engage a valuation
analyst for a valuation engagement of a business.
c. Other CPA firms as every privately held company is required to estimate the
value of its intangible assets for financial statement reporting purposes
d. Business owners in order to estimate the value of a group of assets as
allocated on Form 8594
A is Correct-As described on page 13 of Chapter One, there are many different
purposes for valuations It should be noted that this list is not comprehensive, there are
many other sources of valuation work.
What is the basic difference between an appraisal and a valuation?
a. The act of process of determining the value of a business, business ownership
interest, security, or intangible asset is an appraisal whereas a valuation is the
process of determining the value of gems, equipment, furnishings, and other
tangible assets to be used in determining the value of a business.
b. Nothing; they are the same thing
c. Appraisal is usually for a tangible asset and a valuation is usually for stock or
interest in stock of a company or other intangible asset.
d. Valuation is usually for stock or bond or other public security and an appraisal
is usually for a non-public asset, stock or bond.
C is Correct-Although the terms are often interchanged in a business valuation, a
valuation analyst should define the meaning of each term in any ·written report, so as to
prevent confusion by the report reader.
Risk management in the valuation niche demands solid training and staying
current through continuing education.
a. True
b. False
A is Correct The depth of training, along with continuing one's learning and education
helps the valuation analyst better evaluate the risks related to a particular engagement
and make better choices.
, 4. A buy/sell agreement:
a. Avoids litigation
b. Notes that an independent valuation is to be performed, when, and why
c. Identifies when or what events trigger a buyout, identifies how any buyout will
be funded and identifies the timing of any buyout
d. Always identifies the interest rate, if any, applicable
C is Correct
Business owners, especially those in partnerships, or of owners close to retirement, use
a buy/sell agreement to define who the new owners of the business will be, how they
will pay or be paid for it. What is missing in many is the way to amicably establish the
value of the business, often resulting in shareholder disputes.
5. The most commonly quoted regulatory and professional bodies for business
valuation are:
a. NACVA, AICPA
b. IRS, DOL, FASB
c. ASA, IBA
d. IACVA, ABV
IRS, DOL, FASB
B is Correct The Internal Revenue Service, Department of Labor and Financial
Accounting Standards Board provide regulations for all practitioners to heed.
6. Three theoretical standards of value are:
a. Investment value, going concern value, and fair market value
b. Fair market value, investment value, and fair value
c. Going concern value, asset value, and fair value
d. Book value, fair market value, and liquidation value
B is Correct
The theoretical standards of value include fair market value, fair value and investment
value
7. Fair Market Value is based upon:
a. In business valuation, a legally created standard of value that applies to
specific statutory transactions
b. The market value, the standard of value applicable incases of dissenting
stockholders' valuation rights. Fair market value, with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable
c. The value described by an arms length transaction between a knowledgeable
willing buyer and a knowledgeable willing seller
ASWERS A+ GRADED. Buy Quality Materials!
Primary opportunities for the valuation analyst can be found in working with:
a. Business owners, investors , attorneys, and individuals performing valuations
for a variety of reasons, including estate planning and taxation, litigation support,
mergers and acquisitions, and financial statement reporting.
b. Business owners as only the owner of a business can engage a valuation
analyst for a valuation engagement of a business.
c. Other CPA firms as every privately held company is required to estimate the
value of its intangible assets for financial statement reporting purposes
d. Business owners in order to estimate the value of a group of assets as
allocated on Form 8594
A is Correct-As described on page 13 of Chapter One, there are many different
purposes for valuations It should be noted that this list is not comprehensive, there are
many other sources of valuation work.
What is the basic difference between an appraisal and a valuation?
a. The act of process of determining the value of a business, business ownership
interest, security, or intangible asset is an appraisal whereas a valuation is the
process of determining the value of gems, equipment, furnishings, and other
tangible assets to be used in determining the value of a business.
b. Nothing; they are the same thing
c. Appraisal is usually for a tangible asset and a valuation is usually for stock or
interest in stock of a company or other intangible asset.
d. Valuation is usually for stock or bond or other public security and an appraisal
is usually for a non-public asset, stock or bond.
C is Correct-Although the terms are often interchanged in a business valuation, a
valuation analyst should define the meaning of each term in any ·written report, so as to
prevent confusion by the report reader.
Risk management in the valuation niche demands solid training and staying
current through continuing education.
a. True
b. False
A is Correct The depth of training, along with continuing one's learning and education
helps the valuation analyst better evaluate the risks related to a particular engagement
and make better choices.
, 4. A buy/sell agreement:
a. Avoids litigation
b. Notes that an independent valuation is to be performed, when, and why
c. Identifies when or what events trigger a buyout, identifies how any buyout will
be funded and identifies the timing of any buyout
d. Always identifies the interest rate, if any, applicable
C is Correct
Business owners, especially those in partnerships, or of owners close to retirement, use
a buy/sell agreement to define who the new owners of the business will be, how they
will pay or be paid for it. What is missing in many is the way to amicably establish the
value of the business, often resulting in shareholder disputes.
5. The most commonly quoted regulatory and professional bodies for business
valuation are:
a. NACVA, AICPA
b. IRS, DOL, FASB
c. ASA, IBA
d. IACVA, ABV
IRS, DOL, FASB
B is Correct The Internal Revenue Service, Department of Labor and Financial
Accounting Standards Board provide regulations for all practitioners to heed.
6. Three theoretical standards of value are:
a. Investment value, going concern value, and fair market value
b. Fair market value, investment value, and fair value
c. Going concern value, asset value, and fair value
d. Book value, fair market value, and liquidation value
B is Correct
The theoretical standards of value include fair market value, fair value and investment
value
7. Fair Market Value is based upon:
a. In business valuation, a legally created standard of value that applies to
specific statutory transactions
b. The market value, the standard of value applicable incases of dissenting
stockholders' valuation rights. Fair market value, with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable
c. The value described by an arms length transaction between a knowledgeable
willing buyer and a knowledgeable willing seller
