Premise of Value

The premise of value is also extremely important. In most cases, there are two possible states for a business to be in: going concern or liquidation. A profitable business with prudent debt, reasonable risk, competent management, and other “normal conditions” will almost certainly qualify as a going concern, valued on the basis of the economic benefits it provides to its owners. On the other hand, a business that is in distress due to any number of reasons might be better off liquidating; i.e. ceasing operations, selling its assets, and paying off its obligations. The premise of value depends on the standard of value, the purpose of the appraisal, the business situation, the type of ownership interest to be valued, and many other case facts and circumstances. Your ABA professional will be sure to clarify the appropriate premise of value for your assignment and explain it carefully.

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