Nicole Ticnang

BSACC 2-A

1. What is “market value”?

- Market value (also known as OMV, or "open market valuation") is the price an asset
would fetch in the marketplace, or the value that the investment community gives to a
particular equity or business. The market approach is a valuation method used to
determine the appraisal value of a business, intangible asset, business ownership
interest, or security by considering the market prices of comparable assets or businesses
that have been sold recently or those that are still available. Price-related indicators like
sales, book values, and price-to-earnings are usually utilized.

2. What is the importance of using the market value method in business valuation?
- Market approach is a valuation method used to determine the appraisal value of a
business, intangible asset, business ownership interest, or security by considering the
market prices of comparable assets or businesses that have been sold recently or those
that are still available.

3. What is “earnings per share (EPS)”? What is the formula for computing EPS?
- Earnings per share or EPS is an important financial measure, which indicates the
profitability of a company. It is calculated by dividing the company's net income with its
total number of outstanding shares.

4. What is the difference between market value and book value?

- Book value is the net value of a firm's assets found on its balance sheet, and it is roughly
equal to the total amount all shareholders would get if they liquidated the company
while market value is the company's worth based on the total value of its outstanding
shares in the market, which is its market capitalization.

5. What are the advantages and disadvantages of using market value method in business
valuation?
Advantages
- Market value approach is that it is based on publicly available data on comparable
transactions. Due to this, it would need a fewer number of assumptions as compared to
the other approaches.
- It is straightforward and involves simple calculations.
- It uses data that is real and public.
- It is not dependent on subjective forecasts.

Disadvantages
- It is difficult to identify transactions or companies that are comparable. There is usually
a lack of a sufficient number of comparable companies or transactions.
- It is less flexible compared to other methods.
- The method raises questions on how much data is available and how good the data is.