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. Going-concern value reflects the value of a company's expected future cash flows to owners and creditors.

Statement II is incorrect. In most cases, acquiring firms do assume the liabilities of target firms.

Statement III is correct. The market value of a public company reflects the worth of the business to minority investors as it is determined by the supply and demand for the company's stock.

Statement IV is incorrect. The fair market value of a business is usually determined by its going-concern value, which is usually higher than its liquidation value.

Which of the Following Statements Are Correct