A method of determining the value of a business based on its profit potential is known as a(n)
A) Balance sheet method of business valuation
B) Asset method of business valuation
C) Income statement method of valuation
D) Cash-flow method of valuation

Question

Quizplus · Accepted Answer

The Income Statement method of valuation, also known as the Profit Multiplier method, determines the value of a business based on its anticipated future earnings. This is done by calculating the business' adjusted net income and then multiplying it by a profit multiplier. This method is useful for businesses that generate consistent profits and have the potential for future growth.

A Method of Determining the Value of a Business Based