Business Valuation Body of Knowledge Workbook / Edition 2

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Overview

Sample exam questions and updated information on the latest developments in the field for valuation candidates and professionals

  • Includes questions and exercises that typically appear on accreditation exams
  • Covers the most frequently encountered errors on reports and in examinations
  • Reflects the latest business valuation developments, viewpoints, court case references, and data resources
  • Contains hundreds of multiple-choice and true/false questions, short problems, and fill-in-the-blank questions
  • Includes eight hours of CPE credit through a self-study examination

A companion to Shannon Pratt’s Business Valuation Body of Knowledge, Second Edition or a stand-alone resource, the Business Valuation Body of Knowledge Workbook, Second Edition keeps ABV, ASA, CBA, and CVA candidates and current practitioners up to speed on the latest developments in this constantly changing discipline.

Order your copy today!

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Product Details

  • ISBN-13: 9780471270669
  • Publisher: Wiley
  • Publication date: 1/30/2003
  • Edition description: 2ND
  • Edition number: 2
  • Pages: 192
  • Product dimensions: 10.00 (w) x 7.00 (h) x 0.40 (d)

Meet the Author

Shannon P. Pratt, CFA, FASA, MCBA, CM&AA, is the Chairman and CEO of Shannon Pratt Valuations, Inc. a premier business valuation firm located in Portland Oregon, and is the founder and Editor Emeritus of Business Valuation Resources, LLC. Over a distinguished career of close to four decades, he has performed valuation engagements for M&A, ESOPs, gift and estate taxation, marital dissolution, shareholder oppression and dissent, and numerous other purposes. He has conducted numerous fairness and solvency opinions, has testified in a wide variety of federal and state courts across the country, and frequently participates in arbitration and mediation proceedings. Dr. Pratt is one of the most successful and respected authors in his field. He is the author or coauthor of several industry standards, including Valuing a Business: The Analysis and Appraisal of Closely Held Companies, Valuing Small Businesses and Professional Practices, The Market Approach to Valuing Businesses, Standards of Value, Business Valuation and Taxes, The Lawyer's Business Valuation Handbook, and Cost of Capital.

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Read an Excerpt


Business Valuation Body of Knowledge Workbook



By Shannon P. Pratt


John Wiley & Sons



Copyright © 2003

Shannon P. Pratt
All right reserved.



ISBN: 0-471-27066-0



Chapter One


Business Valuation Legal
and Regulatory Environment


Before embarking on a business valuation, it is essential to gain an understanding of the
legal and regulatory environment. Some aspects of the valuation may be mandated by statutory
and/or case law, such as the standard of value; other aspects may be influenced by the law, such
as the applicability of certain discounts or premiums.

It is important to understand the purpose of the valuation, that is, the use to which the valuation
will be put, because that will determine which laws and regulations govern the valuation.
Some valuations are governed by federal law and some by state law, which may vary widely
from state to state. Statutes apply for some valuations, but not for others. Binding precedential
case law exists for most valuations today but not for all.

Whatever the purpose of the valuation, it is subject to attack, both by regulatory authorities
and by parties to the transaction. Knowing and complying with the relevant laws and regulations
is essential to avoiding those attacks in the first place and to successfully defending against such
attacks should they occur.


MULTIPLE CHOICEQUESTIONS

1. Which of the following is/are governed by federal rather than state law?

a. Ad valorem (property) taxes

b. Corporate dissolutions

c. Dissenting stockholder suits

d. ESOPs

2. Which of the following Revenue Rulings relates to the excess earnings method?

a. 59-60

b. 68-609

c. 77-287

d. 83-120

3. Revenue Ruling 93-12 relates to which of the following?

a. Excess earnings method

b. Valuation of preferred stock

c. Discounts for lack of marketability

d. Family attribution

4. How many judgeships are on the U.S. Tax Court?

a. 10

b. 13

c. 19

d. 35


TRUE OR FALSE QUESTIONS

5. The Federal Rules of Evidence and the Federal Rules of Civil
Procedure are both legally binding. True False

6 Private Letter Rulings (PLRs) are issued at the taxpayer's request
regarding how the IRS will treat a proposed transaction. True False

7 The IRS Valuation Training for Appeals Officers Coursebook may
not be cited as authority. True False

8 Technical Advice Memorandums (TAMs) are released by the IRS
National Office and arise from questions raised by IRS personnel
during audits. True False

9. Revenue Rulings (RRs) have the force of law. True False

10. There can be only one value for a share of stock, regardless of the
purpose for which it is being valued. True False

11. The IRS has published business valuation guidelines. True False


FILL-IN-THE-BLANK QUESTION

12. The memorandums that provide nonbinding advice, guidance, and analysis in response to
questions from IRS agents, attorneys, and appeals officers on both substantive and procedural
issues are called:

(Continues...)






Excerpted from Business Valuation Body of Knowledge Workbook
by Shannon P. Pratt
Copyright © 2003 by Shannon P. Pratt.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Preface xiii
Acknowledgments xv
Basic Formulas xvii
Section 1 Questions 1
Part I. Business Valuation Engagement Environment 1
1. Business Valuation Legal and Regulatory Environment 3
2. Business Valuation Professional Environment 5
3. Business Valuation Engagement 8
4. Litigation Service Engagements 11
Part II. Terminology and Notation 13
5. International Glossary of Business Valuation Terms 15
6. Notation System Used in This Book 17
Part III. Valuation Approaches and Methods 19
7. Overview of Valuation Approaches and Methods 21
8. Income Approach: Cost of Capital 23
9. Income Approach: Discounting Method 30
10. Income Approach: Capitalization Method 34
11. Market Approach: Guideline Public Company Method 38
12. Market Approach: Guideline Merger and Acquisition Method 41
13. Prior Transactions, Offers, and Buy-Sell Agreements 45
14. Adjusted Net Asset Method 47
15. Excess Earnings Method 49
16. Discounts and Premiums 51
17. Reconciliation and Value Conclusion 55
Part IV. Analysis of the Company 57
18. Financial Statement Analysis 59
19. Using Economic and Industry Data 64
20. Site Visits and Interviews 67
Part V. Supporting Data 69
21. Sources of Supporting Data 71
Part VI. Valuations for Specific Purposes 75
22. Tax-Related Valuations 77
23. Employee Stock Ownership Plans 79
24. Shareholder Buyouts and Disputes 82
25. Marital Dissolutions 85
Section 2 Answers 87
Part I. Business Valuation Engagement Environment 87
1. Business Valuation Legal and Regulatory Environment 89
2. Business Valuation Professional Environment 90
3. Business Valuation Engagement 91
4. Litigation Service Engagements 93
Part II. Terminology and Notation 95
5. International Glossary of Business Valuation Terms 97
6. Notation System Used in This Book 98
Part III. Valuation Approaches and Methods 99
7. Overview of Valuation Approaches and Methods 101
8. Income Approach: Cost of Capital 102
9. Income Approach: Discounting Method 105
10. Income Approach: Capitalization Method 108
11. Market Approach: Guideline Public Company Method 111
12. Market Approach: Guideline Merger and Acquisition Method 112
13. Prior Transactions, Offers, and Buy-Sell Agreements 113
14. Adjusted Net Asset Method 114
15. Excess Earnings Method 115
16. Discounts and Premiums 117
17. Reconciliation and Value Conclusion 119
Part IV. Analysis of the Company 121
18. Financial Statement Analysis 123
19. Using Economic and Industry Data 125
20. Site Visits and Interviews 126
Part V. Supporting Data 127
21. Sources of Supporting Data 129
Part VI. Valuations for Specific Purposes 131
22. Tax-related Valuations 133
23. Employee Stock Ownership Plans 134
24. Shareholder Buyouts and Disputes 135
25. Marital Dissolutions 136
CPE Self-Study Examination 137
Index 153
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