The Capitalized Earnings Approach Determines the Value of a Business

question 114

Multiple Choice

The capitalized earnings approach determines the value of a business by capitalizing its expected profits using:

• A)the rate of return reflecting the risk level.
• B)the prime interest rate.
• C)the normal rate of return.
• D)the prevailing rate of inflation.

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Definitions:

Choices

The range of options available to someone at any given time for making decisions.

Online Banking

A service provided by banks that allows customers to perform financial transactions remotely via the internet.

Entry Barrier

Product or service feature that customers expect from organizations in a certain industry; an organization trying to enter this market must provide this product or service at a minimum to be able to compete.

Bank

A financial institution licensed to receive deposits, offer loans, and provide various financial services to individuals and businesses.