Target Company Valuation

What are the two broad approaches to valuing a company?

• Asset-based valuations

• Income-based valuations

• Market-based valuations

• Cost-based valuations

Stock market value or market capitalisation is:

• The total value of a company's outstanding shares of stock.

• The total revenue of a company in a fiscal year.

• The total profit of a company after taxes.

• The total number of employees in a company.

Does the fairness of stock market value depend on the efficiency of the stock market?

• True

• False

Stock market value is a useful starting point for estimating the purchase price of a target company because:

• it reflects the company's current market perception.

• it includes all tangible and intangible assets.

• it is determined by the company's board of directors.

• it is based on historical financial data.

What needs to be added as an incentive to persuade shareholders to sell their shares?

• A higher dividend payout

• A share buyback program

• A premium on the current share price

• Improved company governance

Fill in the blank: One method of asset-based valuation is net asset value (__________).

• net realisable value

• net present value

• net intrinsic value

Which of the following is a method of asset-based valuation?

• Net asset value (replacement value)

• Market capitalization

• Earnings per share

Which of the following is a disadvantage of using book value?

• Reflects current asset valuations

• Ignores intangible assets

• Reliable inventory figures

Even at its most reliable, what does book value offer?

• Book value offers a measure of a company's net asset value, providing insight into its financial health and stability.

• Book value offers a measure of a company's market value, reflecting its current stock price.

• Book value offers a measure of a company's future earnings potential, predicting its growth.

• Book value offers a measure of a company's revenue, indicating its sales performance.

The Net Realisable Value (NRV) is used for what purpose in asset valuation?

• Determining the market value of an asset

• Calculating the depreciation of an asset

• Assessing the potential selling price of an asset minus any costs associated with its sale

• Estimating the replacement cost of an asset