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CEPA Term Session 2-Questions and Answers 100% Pass
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CEPA Term Session 2-Questions and Answers 100% Pass
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CEPA Term Session 2-Questions and Answers 100% PassWhat are common issues that hinder readiness ahead of a transition? Correct Ans-
Personal, Financial, Valuation (buyer v. seller), Credibility of financial information,
Management/ key employee retention, Customer Concentration, Power to Sell/ Offer
Shopping, Deal Breakers
What is a business owner's Wealth Gap? Correct Ans-Difference between net worth (only
excludes business value), and ideal wealth goal.
What is the rule of 4 when it comes to computing a business owner's ideal wealth goal?
Correct Ans-We should assume 4% of wealth goal will suffice annually until end of life.
What is the Profit Gap? Correct Ans-Best In Class recasted EBITDA less business present
recasted EBITDA.
What is the Value Gap? Correct Ans-Best In Class Strategic Value less business present
Strategic Value.
Remember: Strategic Value = Simple Math!
R/EBITDA x Multiple = Value
What is the definition of overall Business Value? Correct Ans-The Economic Benefit Stream
of a Whole Business. Includes Tangibles and Intangibles (the 4 Cs).
, CEPA Term Session 2-Questions and Answers 100% Pass
What are some examples of "Deal Terms" when selling a business? Correct Ans-•Hold-
Back of Proceeds (escrow) •Seller Financing •Performance Payments / Earn-Out Provision
•Non-Competition Agreement •Employment Agreement and/or Consulting Agreement
•Contingent and Unknown Liabilities
Why might Price and Value be different when assessing the sale of a business? How is that
difference resolved? Correct Ans-Buyer and seller may not see eye to eye in terms of what
is being bought/sold (includes assessments of intangibles, future outlook, etc). Differences are
reconciled using "deal terms" to satisfy each party adequately.
Why are there varying Standards of Business Value? Correct Ans-The proper Standard of
Value to be considered in a valuation depends on its purpose.
What are the 5 Standards of Business Value (FIIFE)? Correct Ans-1. Fair Market Value
2. Investment Value
3. Intrinsic or Fundamental Value
4. Fair Value
5. Emotional Value
What is the definition of Fair Market Value? Correct Ans-The price at which the property
would change hands between a "hypothetical" willing buyer and a "hypothetical" willing
seller when the former is not under any compulsion to buy and the latter is under no
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