Question 1. Identify and discuss the three underlying issues in the evaluation of a business.
Question 2. Define the term due diligence. How is it applied to the acquisition of an existing venture?
Question 3. To analyze a business, what types of questions or concerns should the entrepreneur address in the following areas: history of the business, market and competition, sales and distribution, management, and finances?
Question 4. One of the most popular methods of business valuation is the adjusted tangible book value. Describe how this method works.
Question 5. Explain how the P/E method of valuation works. Give an example.
Question 6. What are the steps involved in using the discounted earnings method? Give an example.
Question 7. How do the following methods of valuing a venture work: fixed price, multiple of earnings, return on investment, replacement value, liquidation value, excess earnings, and market value? In each case, give an example.
Question 8. Explain why the following are important factors to consider when valuing a business: start-up costs, accuracy of projections, and degree of control.