FP 2 (8)- Small Business Flashcards
1
Q
Which business valuation method is the poorest indicator of the real value of a company
A
Book Value
- the book value assets can be less or more than its true value
- goodwill is not factored into the value
- the accounting method used will impact the company value
- private corporations do not have their financial statements audited
2
Q
How do you determine liquidation value
ACB company's assets: $140,000 Book value of company assets: $50,000 Realizable value of company's assets: $70,000 Liabilities: $30,000 Disposable costs: $7500 Income tax on sales of assets: $5000
A
Gross realizable value of assets -Liabilities -Disposable costs -Income tax on disposed assets = liquidation value
$70,000- $30,000- $7500- $5000
=$27500
3
Q
Who do not qualify for Employment Insurance Benefits
A
- non arms length
- person who is casually employed
- someone who is employed in exchange for a good or service (barter)
- a position occupied by someone with over 40% of the company’s voting shares
4
Q
What contracts must be in writing
8 of them
A
- Land Contract: sale or disposition of real land
- Guarantee Contract: the guarantor agrees to pay the debtors obligation to a creditor if the debtor fails to pay
- One- Year Contract: the act/service cannot be completed in 1 year
- Executor’s Promise: a promise by the estate’s executor to pay the deceased debt’s out of the deceased’s own personal funds
- Marriage Settlement
- Ratification by Infant
- Sale of Goods: in some provinces certain sales over a minimum amount must be in writing , unless the goods have been delivered or the price paid
- Leases
5
Q
What are the general valuation principles
A
- valuation is on a specific date
- valuation is forward looking and based on future performance
- all else being equal the higher value of the tangible assets, the higher the value of the business
- special interest buyers will pay more than regular buyers, and may pay more if they think the business is worth it
