Which of the Following Statements About Valuing a Business Is

question 75

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 the seller's industry expertise and years of experience to determine what his company is worth.
• D) Business valuation processes are consistently misleading regarding the future earning potential of a business.

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Definitions:

Default Risk Premiums

The additional yield that investors require to hold debt that has a risk of default over a risk-free debt instrument.

Yield

Yield is the earnings generated and realized on an investment over a particular period of time, expressed as a percentage of the investment’s cost or current market value.

Treasury Bond

A long-term government bond with a maturity of more than 10 years used to fund federal expenditures.

Default Risk Premiums

The extra yield that an investor demands to compensate for the risk that the issuer of a bond may default on payment.