- There are more than three approaches to valuing businesses.
TRUE FALSE
There are only three approaches for valuing businesses. These are the market, income, and asset approaches. Under each approach, there are multiple methods. For example, some of the methods under the income approach are discounted cash flow method, income capitalization method, dividend yield method, excess earning method, etc. Therefore, there are more than three methods available for valuing businesses under the three broad approaches. The answer is FALSE.
- To arrive at a valuation conclusion, business valuators use the average of values from the different methods.
TRUE FALSE
Business valuators rely on multiple methods in valuing a single business. However, in drawing the valuation conclusion, valuators rely on the method which is most appropriate given the circumstances of the business. The other results mutually support and validate the conclusion from the preferred method. Section 7 of the Internal Revenue Ruling 59-60 is against the use of averaging of methods in business valuation. The answer is FALSE.
