If a possible target company is "not a sustainable business model", an acquiring company would estimate the possible target company's value using:
A. balance sheet value.
B. going concern value.
C. liquidation value.
Answer: C
If the company's business model is not sustainable, the liquidation value is more appropriate than its value as a going concern (which could be negative). Balance sheet value is an accounting concept, not a valuation concept.
Sunday, February 13, 2011
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