Certified Valuation Analyst Asset-Based Approach and Specialized Topics 2

Question 1

Under the adjusted net asset method, what is the first step in valuing a company?

Accepted Answer

Restate all assets and liabilities to fair market value

Answer

The adjusted net asset method begins by restating each asset and liability from book value to fair market value.

Question 2

The asset-based approach is generally MOST appropriate for which type of company?

Accepted Answer

A holding company whose value derives from its underlying assets

Answer

Holding and investment companies are well suited to the asset-based approach because their value rests in underlying assets.

Question 3

What does the term 'built-in gains tax' liability refer to in an asset-based valuation of a C corporation?

Accepted Answer

The embedded tax on the appreciation of assets if they were sold

Answer

Built-in gains tax reflects the embedded tax that would arise if appreciated assets were sold by the corporation.

Question 4

In the liquidation value method, an 'orderly liquidation' assumes what compared to a 'forced liquidation'?

Accepted Answer

A reasonable period to sell assets at higher prices

Answer

Orderly liquidation allows a reasonable marketing period, generally yielding higher proceeds than a forced sale.

Question 5

Which intangible asset is typically valued using the relief-from-royalty method?

Accepted Answer

A trademark or brand name

Answer

The relief-from-royalty method is commonly applied to trademarks, patents, and other licensable intangibles.

Certified Valuation Analyst Practice Test