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Basic Question 1 of 3
The liquidation value of a company is
B. always more than its going concern value.
C. normally less than its going concern value.
A. always less than its going concern value.
B. always more than its going concern value.
C. normally less than its going concern value.
User Contributed Comments 5
| User | Comment |
|---|---|
| thekapila | Here is why: If profitable: Liquidation < going concern as firm is engaging in profitability by putting resources. If dying: Liquidation > going concern as no point in engaging capital in negative return project. |
| Roy1 | Nice One! |
| coquin22 | understandable |
| ashish100 | "some firms are better dead than alive" |
| jejemike | Interesting.. so a firm can be worth more dead than alive |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
define valuation and intrinsic value and explain sources of perceived mispricing;
explain the going concern assumption and contrast a going concern value to a liquidation value;
describe definitions of value and justify which definition of value is most relevant to public company valuation;
CFA® 2025 Level II Curriculum, Volume 3, Module 20.