Question #15
Reading: Reading 24 Private Company Valuation
PDF File: Reading 24 Private Company Valuation.pdf
Page: 9
Status: Correct
Correct Answer: B
Question
A private business is being valued for the purpose of determining the appropriate level of performance-based managerial compensation. This private company valuation would be best described as a:
Answer Choices:
A. Litigation-related valuation
B. Transaction-related valuation
C. Compliance-related valuation
Explanation
Transaction-related valuations may be performed for reasons related to venture capital
financing, an IPO, a sale of the firm, bankruptcy, or performance-based managerial
compensation. Compliance-related valuations are performed for financial reporting and
tax purposes. Litigation-related valuations may be required for shareholder suits, damage
claims, lost profits, or divorces.