Business Valuations - Homework ES 1. (TCO G) A valuation professional who holds a CVA has the credentials of a: (Points : 2) Continuous valuation analyst. Cost valuation of assets. x Certified valuation analyst. None of the above is correct 2. (TCO G) If a shareholder in a closely held business sells his or her stock, the valuation professional typically would: (Points : 2) Increase the value somewhat to get the minority owner out of the business. Do a standard professional valuation in which the minority interest issue is ignored. Discount the value somewhat to reflect the diminished value of being a minority interest holder. Always use a historical cost basis analysis to take conservatism into account. None of the above is correct. 3. (TCO G) The most commonly accepted methods of business valuation use some form of: (Points : 2) Balance sheet analysis.
Historical cost basis. Book value method. x Income statement approach. 4. (TCO G) The conclusions presented in FASB No. 157 support which FASB Conceptual Framework? (Points : 2) FASB Conceptual Framework No. 2 FASB Conceptual Framework No. 6 FASB Conceptual Framework No. x All of the above None of the above 5. (TCO G) The major business valuation organization that has developed rigorous business valuation standards is: (Points : 2) The National Association of Business Valuation Analysts (NACVA) The American Society of Appraisers (ASA) The Institute of Business Appraisers, Inc. (IBA) x All of the above None of the above 6. (TCO G) In a typical business valuation report, one exhibit that is seldom used is: (Points : 2) Limiting conditions. Definitions of valuation terms. Ratio analysis of the company. Common size balance sheets of the company. None of the above. 7. (TCO G) "Equitable distribution" in divorce cases is driven by: (Points : 2) The Uniform Commercial Code nationally. x Individual state laws. Supreme Court rulings. Professional standards. None of the above. 8. (TCO G) A "minority interest" in a business: (Points : 2) Technically is less than a 50-percent ownership in the business Might be worth less than a pro-rata share of the business value May have limited influence in the operations of the business x All of the above None of the above 9. (TCO G) IRS Rev. Rul. 59-60: (Points : 2)
Deals with the valuation of closely held businesses Provides a list of eight factors that should be considered in valuing a closely held business Is particularly useful for valuing closely held businesses in estate and gift tax situations x All of the above None of the above 10. (TCO G) Preparing common-sized financial statements and performing ratio analyses of financial statements are examples of: (Points : 2) "Customizing" financial statements. "Downsizing" financial statements. x "Spreading" financial statements. "Simplifying" financial statements. None of the above.
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