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CMA Final · Strategic Performance Management and Business Valuation · Fundamentals of Business Valuation

In business valuation, the term 'standard of value' refers to:

Standard of value is the definition of the type of value being estimated, for example fair market value, fair value or investment value. It sets the conceptual basis of the valuation, whereas the approach and method are the techniques used to reach that value.

  1. AThe definition of the type of value being estimated, such as fair market value or investment valueCorrect
  2. BThe set of formulas used to discount future cash flows
  3. CThe statutory minimum price at which shares may be issued
  4. DThe accounting standard applied to prepare the balance sheet of the target

Explanation

Standard of value defines what kind of value is being measured (fair market value, fair value, investment value, liquidation value). It is distinct from the valuation method or approach, which is the technique used. Formulas and accounting standards are tools, not the definition of value itself.

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