Which of the Following Methods Is Used Under the Income

question 16

Multiple Choice

Which of the following methods is used under the income approach of business valuation?

• A) net asset value method
• B) capitalization of earnings method
• C) dividend payout method
• D) guideline transaction method

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Definitions:

Investments

Assets purchased with the expectation that they will generate income in the future or appreciate in value for future resale.

Operating Cash Flow

The revenue generated by a company through its primary business functions.

Interest Expense

This is the cost incurred by an entity for borrowed funds, which can include the cost of bonds, loans, and lines of credit.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the loss in value over time.