Corporate Valuation Methods Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Valuation Methods flashcards as text
Asset-based valuation determines firm value primarily by:
Answer: Summing the fair value of assets less liabilities
Asset-based approaches value a firm as the net fair value of its assets minus liabilities.
Liquidation value is most relevant when a company is:
Answer: Financially distressed or being wound down
Liquidation value applies when assets will be sold off, typically in distress or wind-down scenarios.
A sensitivity analysis in valuation is used to:
Answer: Show how value changes when key assumptions vary
Sensitivity analysis reveals how the valuation responds to changes in inputs like WACC or growth.
In a sum-of-the-parts (SOTP) valuation, a diversified conglomerate is valued by:
Answer: Valuing each business segment separately and adding them
SOTP values each division independently and sums them, often revealing a conglomerate discount.
Which scenario would most likely justify a valuation premium over comparable trading multiples?
Answer: Expected synergies in an acquisition
Acquisition synergies can justify paying a premium above standalone trading values.
Free cash flow to equity (FCFE) differs from FCFF in that FCFE:
Answer: Is after interest and net debt repayments, belonging only to shareholders
FCFE is the residual cash available to equity holders after debt obligations are met.
Best practice in corporate valuation is to:
Answer: Triangulate value using multiple methods rather than relying on one
Combining DCF, comps, and precedent transactions produces a more defensible valuation range.