CMA Final · Strategic Performance Management and Business Valuation · Fundamentals of Business Valuation
Which approach to valuation is most appropriate for a holding company whose main assets are investments in listed securities?
The net asset approach with investments restated at market value suits an investment holding company, because its worth lies in the underlying securities it owns rather than in operating earnings or sales.
- ANet asset (adjusted book value) approach using market values of investmentsCorrect
- BCapitalisation of historical sales
- CReplacement of the management team
- DPayback period approach
Explanation
An investment holding company derives value from the market value of its underlying holdings, so adjusting net assets to fair value is most suitable. Sales capitalisation and payback are not valuation approaches for such a company, and management replacement is not a valuation method.
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