ACCT 468 Final - Ch 17

Which of the following items should be included in the drafting of a standardized engagement agreement?  
A. Identify the client  
B. Specify the interest, date, purpose, and intended use of the valuation  
C. Define the standard value  
D. All of the above

The three valuation approaches are the Income Approach, Market Approach and Cost Approach. Which of the following methods falls under the Market Approach of valuation? 
A. Adjusted book value  
B. Guideline (public company) method 
C. Discounted future income  
D. Capitalization of excess earnings method

Which of the following is not one of the three general types of valuations? 
A. Book value approach
B. Income approach 
C. Market approach 
D. Asset-based 

Which of the following is not the purpose of a buy-sell agreement? 
A. Determine the value of the subject company to the specific buyer 
B. Establish company values for estate tax purposes
C. Provide liquidity to deceased or withdrawing owners 
D. Ensure the continuity of management and ownership 

What is the correct order of discounting: 
A. Loss of key person, minority interest, lack of marketability
B. Lack of marketability, loss of key person, minority interest 
C. Order does not matter
D. Minority interest, lack of marketability, loss of key person 

Generally speaking "book value" is considered to be:  
A. Not really a valuation method. 
B. The best measure of value because it reflects actual accounting measurements.  
C. A good valuation method but it usually provides a conservative measure of value.  
D. None of the above.

"Equitable distribution" in divorce cases is driven by:    
a. The Uniform Commercial Code nationally.  
b. Individual state laws.  
c. Supreme Court rulings.  
d. None of the above.

Which of the following is not one of the valuation methods used for business valuations? 
A. Asset-based Approach 
B. Income Approach 
C. Market Approach 
D. All of the above are valuation methods

Which of the following is not a discount or premium applied to business valuations?  
A. Minority interest discount 
B. Lack of marketability discount 
C. Flow-through business premium 
D. Loss of a key person discount 
E. All of the above are discounts or premiums that can be applied to business valuations

Which of the following is not a general type of valuation? 
A. Liability-based Approach 
B. Income Approach 
C. Asset-based Approach 
D. Market Approach

A key issue in computing the valuation of a business is the percentage of ownership interest being valued. (T/F)
True False

An engagement agreement is necessary in any valuation or client-related undertaking because it 
A. Clearly sets forth the expectations of the business valuator and client  
B. Reduces the chance for misunderstanding and malpractice litigation and claims against the business valuator. 
C. Increases the likelihood of the valuator being paid since it establishes a clear obligation on behalf of the client 
D. All of the above

The market valuation approach is used to value asset-intensive business such as retail and manufacturing, focusing on what the equipment and real estate are worth. 
True/False
True False

The asset-based approach is a type of valuation generally used to: 
A. Value asset-intensive businesses such as retail and manufacturing.
B. Value companies with many liabilities. 
C. Value businesses with very few assets.
D. Value service companies. 

Which of the following are methods under the Market Approach? 
A. Guideline (public company) method 
B. Market data method 
C. Past transactions method 
D. All of the above

. The most common measure of value is:  
A. Fair market value.  
B. Intrinsic value.
C. Historical cost value.
D. None of the above is true.

Which is not one of the three main valuation methods:  
A.  All are valuation methods.
B. The market approach.  
C. The income approach.  
D. The cost approach.