Certified Valuation Analyst Business Valuation Concepts 2

Question 1

Which standard of value assumes a hypothetical willing buyer and willing seller, neither under compulsion and both reasonably informed?

Accepted Answer

Fair market value

Answer

Fair market value is defined by the hypothetical willing-buyer/willing-seller construct with no compulsion and reasonable knowledge.

Question 2

Investment value differs from fair market value primarily because it reflects:

Accepted Answer

The value to a specific owner or buyer

Answer

Investment value is value to a particular investor based on individual requirements and synergies, not a hypothetical party.

Question 3

The premise of value that assumes the business will continue operating into the foreseeable future is:

Accepted Answer

Going concern

Answer

Going concern premise assumes continued operation rather than cessation and sale of assets.

Question 4

Under a forced liquidation premise, value is typically LOWER than orderly liquidation because:

Accepted Answer

Assets are sold quickly with little marketing time

Answer

Forced liquidation compresses the selling timeline, reducing prices versus an orderly process.

Question 5

Intrinsic (fundamental) value is best described as the value an analyst concludes based on:

Accepted Answer

Analysis of the company's true underlying characteristics

Answer

Intrinsic value reflects an analyst's judgment of true worth from fundamentals, independent of current market price.

Certified Valuation Analyst Practice Test