A Method of Determining the Value of a Business Based

question 40

Multiple Choice

A method of determining the value of a business based on its profit potential is known as a/an

• A) Balance sheet method of business valuation
• B) Asset method of business valuation
• C) Income statement method of valuation
• D) Cash-flow method of valuation

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Definitions:

Nominal Annual Rate

Nominal Annual Rate is the annual rate of interest without taking into account the compounding of interest within a year or the effects of inflation.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Future Value

The estimated value of an investment at a specific future date, taking into account factors such as interest rates and compounding.

Amortized

The process of spreading out a loan into a series of fixed payments over time, covering both principal and interest.