CFA Practice Question
The value of asset-based analysis of a business is equal to the sum of its parts. That is the theory underlying the asset-based approaches to business valuation, including private equity valuation. Which value is least likely to be used for the valuation purpose?
A. market (fair) value.
B. book value.
C. liquidation value.
Explanation: Book value must be adjusted in most cases as it may not reflect the true value of assets/liabilities.
User Contributed Comments 2
| User | Comment |
|---|---|
| Inaganti6 | but market value can be an exaggeration during times of irrational exuberance ....these gray area questions |
| lighty0770 | Agreed with inaganti6. Generally in valuation we would assume going concern and therefore would not consider a liquidation value as an approach to valuation as that would directly contradict the income and market approaches. |