Business Valuation Methods & Principles Flashcards
6 cards from real BCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Business Valuation Methods & Principles flashcards as text
What is the primary purpose of business valuation?
Answer: To determine the economic worth of a business
Business valuation determines the economic worth of a business for purposes such as mergers, acquisitions, or financial reporting.
Which valuation method is based on projected future cash flows?
Answer: Discounted Cash Flow (DCF) method
The Discounted Cash Flow (DCF) method values a business by estimating future cash flows and discounting them to their present value.
What is the key advantage of using the market approach for business valuation?
Answer: It relies on actual market transactions
The market approach compares similar businesses in the industry to determine a company's valuation based on real market transactions.
Why is goodwill an important factor in business valuation?
Answer: It reflects intangible assets like brand reputation
Goodwill represents a company’s intangible assets, such as brand reputation and customer loyalty, that add to its market value.
Which factor is most important when determining a business's valuation?
Answer: Revenue, profitability, and market conditions
Revenue, profitability, market conditions, and industry trends are all critical factors in determining business valuation.
What is the role of an appraiser in business valuation?
Answer: To provide an objective valuation of the business
A business appraiser provides an objective assessment of a company's worth using standardized valuation methodologies.