CFA Practice Question

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CFA Practice Question

The asset-based valuation approach arrives at the value of the private equity company to the:
A. debt and equity holders.
B. equity holders.
C. asset buyers.
Explanation: This approach values a company based its total underlying asset values less the value of any related liabilities.

User Contributed Comments 4

User Comment
Lt2201 The answer should be debt & equity holders, since it's the asset based approach, NOT net asset based.

That's why they call it NAV, not AV.
charliedba that's so wrong, @Lt2201. It's for equity holders only.
ascruggs92 ^Lt2201, you're thinking about it in terms of valuing a company from the prospective of a buyer. As PE is a partnership that owns individual investments, debt holders would just be a bank that extended credit, not a bond that was publicly issue. The bank uses its own measures to judge credit worthiness, only the equity holders (i.e. the partners) use the asset-based valuation to value the PE firm as a whole.
thebkr777 ^Thank you for explaining it
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