Which of the following statements are correct?
I.Going-concern value of a firm is equal to the present value of expected future cash flows to owners and creditors.
II.When an acquiring firm purchases a target firm's equity,the acquirer need not assume the target's liabilities.
III.The market value of a public company reflects the worth of the business to minority investors.
IV.The fair market value of a business is usually the lower of its liquidation value and its going-concern value.

Question

Quizplus · Accepted Answer

Statement I is correct as the going-concern value represents the present value of expected future cash flows to owners and creditors.
Statement III is also correct as the market value of a public company reflects the worth of the business to minority investors.
Statement II is incorrect as when an acquiring firm purchases a target firm's equity, they also assume the target's liabilities.
Statement IV is incorrect as the fair market value of a business is usually the higher of its liquidation value and going-concern value, not the lower.

Which of the Following Statements Are Correct