Certified Valuation Analyst Business Valuation Concepts

Question 1

What is the difference between fair market value and investment value in business valuation?

Accepted Answer

Fair market value assumes a hypothetical buyer/seller; investment value is specific to a particular investor

Answer

They are always the same amount

Answer

Investment value is always lower than fair market value

Answer

Fair market value considers synergies while investment value does not

Question 2

What is a control premium in business valuation?

Accepted Answer

An additional value associated with owning a controlling interest in a business

Answer

A discount applied to minority interests

Answer

The fee paid to a valuation analyst

Answer

The premium charged for expedited valuation services

Question 3

What is a discount for lack of marketability (DLOM)?

Accepted Answer

A reduction in value reflecting the difficulty of selling a privately held interest compared to publicly traded shares

Answer

A sales discount offered to customers

Answer

A markdown on inventory value

Answer

A reduced fee for returning clients

Question 4

What is the premise of value concept in business valuation?

Accepted Answer

Whether the business is valued as a going concern or in liquidation

Answer

The hypothesis that all businesses have equal value

Answer

The assumption that value never changes

Answer

The idea that real estate is always the most valuable asset

Question 5

What is goodwill in the context of business valuation?

Accepted Answer

The excess of business value over the fair value of its identifiable tangible and intangible assets

Answer

The physical buildings and equipment owned by the business

Answer

Customer complaints and negative reviews

Answer

The company's employee headcount

Question 6

What is the standard of value and why is it important in business valuation?

Accepted Answer

The definition of value being sought (fair market value, fair value, investment value), which affects methodology and conclusion

Answer

The quality standard for valuation reports

Answer

The minimum acceptable value for a business

Answer

The industry standard price for similar businesses