Which of the Following Statements About Valuing a Business Is

question 68

Multiple Choice

Which of the following statements about valuing a business is true?

• A)The balance sheet technique is the best way to value a business.
• B)Business valuation is partly art and partly science.
• C)Buyers should rely on established "rules of thumb" to decide what a company is worth.
• D)The primary reason buyers purchase existing businesses is to get their current earning potential.

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Definitions:

Factory Overhead

All indirect costs related to the production process, such as utilities, maintenance, and supervision, not directly tied to specific units produced.

Factory Burden

Another term for manufacturing overhead, encompassing all indirect costs involved in operating a factory, excluding direct materials and labor costs.

Surplus

The amount by which a company's income exceeds its spending, or in a broader sense, an excess of assets over liabilities.

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.