| LOS m: Explain how the legal environment affects the valuation of closely held companies.
Q1. Edward Cloever, CFA, is reviewing a colleague’s first draft of a research report on how the legal environment affects the valuation of closely held companies. Two statements in the report draw Cloever’s attention:
Statement 1: In situations that require a legal determination of a company’s value, market transactions provide a ready estimate for a publicly traded company, but no uniform definition exists for the value of a closely held company.
Statement 2: If two closely held companies are identical in their operations and profitability, but one is structured as a corporation and the other is structured as a partnership, the rational investor should be indifferent between the two companies.
Should Cloever agree or disagree with these two statements?
Statement 1 Statement 2
A) Agree Disagree
B) Agree Agree
C) Disagree Disagree
Q2. Which of the following statements regarding closely held companies is FALSE?
A) Closely held companies can be formed as corporations, partnerships, or sole proprietorships.
B) The valuation of closely held companies is straightforward because of the relatively small number of investors.
C) The equity shares of closely held companies are not publicly traded.
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发表于 2009-2-28 17:55
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