Explain the two methods that are commonly considered under the ...

[Marty]

Explain the two methods that are commonly considered under the market approach of valuation of the company.
 
  What will be an ideal response?

Question 2

Revenue and expenses would not appear on a(n)
 a. unadjusted trial balance.
   b. adjusted trial balance.
   c. income statement.
   d. work sheet.
   e. post-closing trial balance.

[miss.ashley]

Answer to Question 1

Under the market approach, a company's value is determined relative to market comparisons (or comps). Two methods that are commonly considered under this approach are the dividend payout method and the guideline transaction method. The dividend payout method is similar to the COE method, except dividends are capitalized instead of earnings and the capitalization rate is derived from dividend yields of publicly traded companies (thus, the market aspect). Guideline transactions may be previous transactions in the subject company's stock or sales of ownership interests in similar companies. Although various databases are available that collect and report transactions data for closely held companies, these databases may not offer the level of detail necessary to determine whether the transaction is indeed comparable. Due to difficulty in identifying valid comps, market methods are considered (perhaps for purposes of a sanity check) but rarely employed as the primary indicator of value.

Answer to Question 2

e