Multiple Choice Questions 1 In applying the guideline publicly traded
Multiple Choice Questions:
1. In applying the guideline publicly traded company method, comparable companies are selected based on which of these?
a. Capital structure.
b. Credit status.
c. Products.
d. All of these.

2. In which general valuation approach is a price-based ratio most likely to be used by the analyst?
a. Income.
b. Asset.
c. Market.
d. All of these.

3. Which general valuation approach is especially appealing to lenders?
a. Income.
b. Asset.
c. Market.
d. All of these.

4. Which of the following is not true regarding the capitalized excess earnings method?
a. It combines asset-based and market approaches.
b. Its computations involve estimating normal income based on net assets as determined by the asset accumulation method.
c. Its computation involves capitalizing the normal income.
d. All of these are true.

5. In applying the excess earnings method, it is sometimes desirable to exclude which of the following if the goal is to establish a value for the operating portion of the business?
a. Nonoperating assets, liabilities, and income.
b. Nonoperating assets and liabilities.
c. Nonoperating assets and income.
d. Nonoperating liabilities and income.

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