Business valuations based on balance sheet methods suffer certain disadvantages, including:
A) they are extremely complex and are difficult to calculate.
B) they do not consider the future earning potential of the business.
C) they fail to take into account what is usually the largest asset a company owns: inventory.
D) All of the above

Question

Quizplus · Accepted Answer

Balance sheet methods do not consider future earning potential or intangible assets, which are important factors in determining the overall value of a business. While inventory may be a significant asset, it is not the only factor to consider in valuation. Option A is not true as balance sheet methods are relatively straightforward.

Business Valuations Based on Balance Sheet Methods Suffer Certain Disadvantages