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Chapter 4 - Introduction to business valuations Questions and Answers 100% correct
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Chapter 4 - Introduction to business valuations
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Chapter 4 - Introduction to business valuationswhat are the most common valuation methods? - answer - discounted cash flow
- asset-based
- dividend discounting
- comparable valuations
what is the difference between equity value and enterprise value? - answer Enterprise value is a measure which is very widely used in valuation for acquisitions and
private equity, as it represents both the value of the underlying business enterprise being acquired, and the total finance needed to acquire and/or refinance that business. Equity value is more commonly used in equity markets valuation and investment analysis, where the need is to establish a market capitalization or price per share.
what is the use, advantages and disadvantages of enterprise value? - answer what are the differences between public and private companies with respect to the availability and reliability of company information and the typical sources of such information? - answer what are the various responsibilities of public and private companies to make information available or respond to information requests? - answer Enterprise value - answer ______ refers to the market value of ALL of the OPERATIONAL ASSETS of a business, irrespective of how these are financed. It can be calculated as the present value (PV) of the cash flows (these assets are capable of generating), BEFORE deduction of any returns to debt providers or shareholders.
An alternative way of looking at enterprise value is as the total market value of both the debt (including any outstanding preference shares) and the equity of the company - which is equivalent to the total market value of the company's operational assets.
Equity value - answer _____ of a business is the market value of the ordinary shares
of the company. Lenders and preference shareholders have a prior claim on the assets and profits of a company, ahead of ordinary shareholders. The equity value of the business is the residual of the enterprise value after the deduction of these prior claims. are listed or quoted companies required to make announcements through a regulated information system of any material changes to their position? - answer both are required to make announcements of any material changes under the Market Abuse Regulation, Disclosure Guidance and Transparency Rules, Listing Rules, AIM Rules and/or the NEX Exchange Growth Market Rules.
In addition, the requirements of the UK Corporate Governance Code and the QCA Corporate Governance Code on a comply or explain basis (the former compulsory for premium listed companies, while AIM quoted companies can choose between the two) have led to a greater level of disclosure.
5 years - answer listed and quoted companies are required to maintain investor relations websites that contain all announcements and documents published during the last ____ years
market value - answer market capitalisation of a company represents the value of the company's equity capital
also referred to as market cap
transaction value - answer common term used in M&A. value of entire company being purchased = enterprise basis = the price being paid for the equity + (book) value of debt. calculated using the target company's equity value at the bid price plus the book value of the target company's debt it is therefore the total cost being incurred by the purchaser
takeover of a public company - answer In a _____, the price paid for the equity is likely to be significantly higher than the pre-offer market value. This is because it is normal to pay a bid premium to acquire control of the shares of a quoted company. When a company is rumoured to be the target of a takeover, it is common to see its stock market value increase to a level where it reflects the expected transaction value.
break up value - answer ____ of the company is the value that would be achieved if the company were liquidated and each of its assets sold separately. Analysists calculate the MV of each asset, assuming appropriate discounts for a forced sale, and then deducts the sum of its total liabilities. Any residual value = break up value. represents the lowest possible value for the company
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