Week 7 homework quiz

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” indivorcecases 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.