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Test: Valuation Of Goodwill And Shares- 2 - B Com MCQ


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10 Questions MCQ Test - Test: Valuation Of Goodwill And Shares- 2

Test: Valuation Of Goodwill And Shares- 2 for B Com 2024 is part of B Com preparation. The Test: Valuation Of Goodwill And Shares- 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Valuation Of Goodwill And Shares- 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Valuation Of Goodwill And Shares- 2 below.
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Test: Valuation Of Goodwill And Shares- 2 - Question 1
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What are the two main types of asset-based business valuation approaches?

Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 1
The two main types of asset-based business valuation approaches are going concern and liquidation. A going concern asset-based approach considers the net balance sheet value of a business's assets minus its liabilities, while a liquidation asset-based approach determines the net cash that would be obtained from selling all assets and paying off liabilities.
Test: Valuation Of Goodwill And Shares- 2 - Question 2
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Which of the following is NOT a factor that may contribute to the goodwill of a business?

Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 2
The capital structure of a business (Option C) is not typically considered a factor contributing to goodwill. Goodwill is influenced by factors such as location, employee satisfaction, possession of trademarks, reputation, contracts, and more.
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Test: Valuation Of Goodwill And Shares- 2 - Question 3
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Why can valuing a sole proprietorship based on market value be challenging?

Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 3
Valuing a sole proprietorship based on market value can be challenging because sole proprietorships are individually owned, making it difficult to find comparable businesses that have been sold. Market value approaches rely on comparing a business to similar businesses that have recently sold, which can be problematic for sole proprietorships due to the lack of available comparable sales data.
Test: Valuation Of Goodwill And Shares- 2 - Question 4
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What does the term "goodwill" refer to in business valuation?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 4
Goodwill refers to the intangible assets of a business, such as its reputation, customer base, brand recognition, and other advantages that enable the business to earn higher profits than the return typically expected on its tangible assets. It represents the value derived from non-material factors that contribute to a business's success.
Test: Valuation Of Goodwill And Shares- 2 - Question 5
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Which factor influences the capitalization factor in the Capitalizing Past Earnings approach?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 5
The capitalization factor in the Capitalizing Past Earnings approach reflects the rate of return a reasonable purchaser would expect on the investment and the risk that expected earnings will not be achieved. It's influenced by factors like market reputation, which impacts the perceived risk and expected returns of the investment.
Test: Valuation Of Goodwill And Shares- 2 - Question 6
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What is the primary focus of earning value approaches to business valuation?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 6
Earning value approaches to business valuation focus on the future ability of a business to generate cash flow and wealth. These approaches consider factors like past earnings but emphasize the prediction of future earnings and cash flows to determine the value of the business.
Test: Valuation Of Goodwill And Shares- 2 - Question 7
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When might the need for evaluating goodwill arise?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 7
The need for evaluating goodwill arises when a business is to be sold to another company, when a business is to be amalgamated with another company, or in other scenarios where the value of goodwill needs to be determined, such as in taxation, estate planning, or shareholder disputes.
Test: Valuation Of Goodwill And Shares- 2 - Question 8
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What is the fair market value standard in business valuation?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 8
The fair market value standard in business valuation refers to the value determined by an independent buyer and seller who have the necessary information and are not under any undue influence or stressors. This standard represents a balanced and informed perspective of the business's value.
Test: Valuation Of Goodwill And Shares- 2 - Question 9
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Which of the following is a common reason for needing a business valuation?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 9
Developing an exit strategy for the business is a common reason for needing a business valuation. Business valuations help owners set a baseline value, strategize for improvement, negotiate sales, plan for succession, and more.
Test: Valuation Of Goodwill And Shares- 2 - Question 10
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What is the primary role of a certified valuation expert in business valuation?
Detailed Solution for Test: Valuation Of Goodwill And Shares- 2 - Question 10
The primary role of a certified valuation expert in business valuation is to perform a comprehensive financial analysis. This includes assessing various factors that contribute to the business's value, providing insights into its strengths and weaknesses, and determining its fair market value based on established valuation methodologies.
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