Which of the Following Statements Is True of the Business

question 67

Multiple Choice

Which of the following statements is true of the business valuation principle?

• A) As per first valuation principle, the value of business does not change over time.
• B) The value of a business is solely affected by managers' financing decisions.
• C) The fair market value of a business is the value of that business to a hypothetical person who is knowledgeable about the business.
• D) Estimating the fair market value of a business includes the value of synergies or the effects of any investor-specific management style.

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Definitions:

Deadweight Loss

A loss in economic efficiency that occurs when the equilibrium outcome is not achievable or is not achieved.

Elastic

A characteristic of a good or service that indicates its sensitivity to changes in price, with relatively large changes in quantity demanded or supplied in response to price changes.

Inelastic

Inelastic describes a situation where the demand or supply for a good or service is not significantly changed by variations in price.

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a good or service and the actual price they do pay.