If the Constant Growth Model Is Used to Calculate the Value

question 43

True/False

If the constant growth model is used to calculate the value of a target company,the terminal value is an insignificant cash flow analysis.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account on a company's balance sheet that represents the estimated portion of accounts receivable that may not be collectible.

Allowance Method

An accounting technique that estimates and sets aside a portion of accounts receivable deemed uncollectible as an allowance for doubtful accounts.

Account Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Total Current Assets

The sum of all assets expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.