Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Valuation Concepts and Methodologies > Asset Based Valuation > Flashcards

Asset Based Valuation Flashcards

1
Q

Defined by the industry as transactions that would yield future economic benefits as a result of past transactions.

A

Assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

It is highly dependent on the value that the asset will generate from now until the future.

A

Value of invested opportunities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Investments that started from scratch.

A

Green Field Investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Investments that are already in the going concern state; Opportunities that can either be partially or fully operational.

A

Brown Field Investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Businesses that has a long term to infinite operational period.

A

Going Concern Business Opportunities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

They suggest that risk management principles must observed in doing business and determining its value.

A

Committee of Sponsoring Organization of the Treadway Commision (COSO)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

According to COSO, the benefits of having a sound Enterprise-wide Risk Management allows the company to:

A
  1. Increase the opportunities.
  2. Facilitate management and identification of the risk factors that affect the business.
  3. Identify or create cost-efficient opportunities.
  4. Manage performance variability.
  5. Improve management and distribution of resources across the enterprise.
  6. Make the business more resilient to abrupt changes.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

This approach only focuses on the current and historical value of the assets and will disregard the value it can generate in the future and may not fully represent the true value of the assets.

A

Asset-based valuation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Information required for asset-based valuation:

A

The financing structure
Classes of equity
Other sources of funding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The popular methods used to determine the value using assets as its bases:

A
  1. Book Value Method
  2. Replacement Value Method
  3. Reproduction Value Method
  4. Liquidation Value Method
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

The value recorded in the accounting records of a company.

A

Book Value Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

This method uses the asset values as presented on the statement of financial position less the liabilities.

A

Book Value Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

This method is highly dependent on the value of the assets as declared in the audited financial statements, particularly the balance sheet or the statement of financial position.

A

Book Value Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The assets are required to be categorized into 2.

A

Current and Non-current assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Assets that are expected to be realized within the company’s normal operating cycle, expected to be realized within 12 months after these transactions were reported, or held primary for the purpose of trading.

A

Current Assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Assets wherein benefits can be realized in more than 12 months.

A

Non-current Assets

18
Q

The liabilities are required to be categorized into 2.

A

Current Liabilities and Non-current Liabilities

19
Q

Liabilities that are expected to be settled within the entity’s normal operating cycle, due to be settled within 12 months, held for the purpose of trading or if the company does not have ability to settle beyond 12 months.

A

Current Liabilities

20
Q

Liabilities which are due to be settled longer than 12 months.

A

Non-current Liabilities

21
Q

The method where the value of the enterprise is based on the book value of the assets less all non-equity claims against it.

A

Book Value Method

22
Q

Formula of the Book Value Method

A

Net Book Value of Assets = (Total Assets - Total Liabilities) / Number of Outstanding Shares

23
Q

This method provides a more transparent view on firm value and is more verifiable since this is based in the figures reflected in the financial statements.

A

Book Value Method

24
Q

This method only reflects historical value and might not reflect the real value of the business now.

A

Book Value Method

25
Q

The cost of similar assets that have the nearest equivalent value as of the valuation date.

A

Replacement Cost

26
Q

Under this method, the value of the individual assets shall be adjusted to reflect the relative value or cost equivalent to replace that asset.

A

Replacement Value Method

27
Q

What are the factors that affect the replacement value of an asset?

A
  1. Age of the asset
  2. Size of the assets
  3. Competitive advantage of the asset
28
Q

This factor will enable the valuator to determine the costs related in order to upkeep a similarly aged asset and whether assets with similar engineering design are still available in the market.

A

Age of the asset

29
Q

This factor is important for fixed assets particularly real property where assets of the similar size will be compared.

A

Size of the assets

30
Q

Assets which have distinct characteristics are hard to replace. However, the characteristics and capabilities of the distinct asset might be found in similar, separate assets.

A

Competitive advantage of the asset

31
Q

Formula of the Replacement Value Method

A

Replacement Value per share = (Net book Value +/- Replacement Adjustment) / Outstanding Shares

32
Q

An estimate of cost of reproducing, creating, developing or manufacturing a simiar asset.

A

Reproduction Value

33
Q

This method adjusts the assets values as presented on the statement of financial position less liabilities.

A

Replacement Value Method

34
Q

This method requires reproduction cost analysis which is internally done by companies especially if the assets are internally developed.

A

Reproduction Value Method

35
Q

This method is useful when calculating the value of new or start-up businesses, ventures that use specialized equipment or assets, firms that are heavily dependent on intangible assets and those with limited market information.

A

Reproduction Value Method

36
Q

This method adjusts the asset values and will consider the value when the asset is rebuilt.

A

Reproduction Value Method

37
Q

Steps in determining the equity value using the reproduction value method:

A
  1. Conduct reproduction cost analysis on all assets.
  2. Adjust the book values to reproduction cost values (similar to replacement value).
  3. Apply the replacement value formula using the figures calculated in the preceding step.
38
Q

This method is an equity valuation approach that considers the salvage value as the value of the asset.

A

Liquidation Value Method

39
Q

This method assumes that the reasonable value for the company to be purchased is the amount which the investors will realize in the end of its life or the value of the when it is terminated.

A

Liquidation Value Method

40
Q

This method presents the value based on its salvage value.

A

Liquidation Value Method

Valuation Concepts and Methodologies (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions