Certified Valuation Analyst (CVA) Practice Exam

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Prepare for the Certified Valuation Analyst exam. Utilize interactive flashcards and multiple-choice questions, each complete with hints and thorough explanations. Gear up to excel in your CVA exam!

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What premise of value accounts for intangible elements such as a trained workforce and necessary licenses?

  1. Intrinsic value

  2. Liquidation value

  3. Going-concern value

  4. Fair market value

The correct answer is: Going-concern value

Going-concern value is the premise of value that considers the ongoing operational status of a business, thereby accounting for intangible elements like a trained workforce, customer relationships, brand reputation, and any necessary licenses or permits that contribute to its ability to generate revenue. This concept emphasizes that a business operating in a state of continuity has additional value beyond its tangible assets or what could be realized from a forced sale. In a going-concern scenario, the value of the business not only includes its physical assets but also the value of its operational capabilities, which are often driven by factors such as employee expertise and established processes. This distinguishes it from other premises of value, which may focus solely on tangible assets or liquidation scenarios where such intangibles may not significantly contribute to the overall valuation. Other premises of value, such as fair market value, represent the price at which property would sell between a willing buyer and seller, but without necessarily emphasizing the continuity of business operations. Intrinsic value typically pertains more to the fundamental worth of an asset, while liquidation value focuses on the sale of assets in a distressed situation, which generally excludes the future income potential associated with intangible assets critical to a company's ongoing success.