Business Valuations Based on Balance Sheet Methods Suffer Certain Disadvantages

question 70

Multiple Choice

Business valuations based on balance sheet methods suffer certain disadvantages, including:

• A) they are extremely complex and are difficult to calculate.
• B) they do not consider the future earning potential of the business.
• C) they fail to take into account what is usually the largest asset a company owns: inventory.
• D) All of the above

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Definitions:

Estimated Average

The estimated average is a calculated middle value within a set of numbers, determined to represent a general or expected value in data analysis.

Annual Income

The total amount of income earned over a year, including wages, salaries, bonuses, and other earnings before taxes and deductions.

Average Investment

The mean amount of capital invested in a particular asset, project, or portfolio over a specific time period.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return; used in financial analysis to assess the value of future income.