ASA BV Challenge Exam Practice Questions - ASA Business Valuation Challenge Exam

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Before applying a guideline company's price multiple to the subject, an appraiser normalizes the subject's earnings. The primary purpose of normalization adjustments is to:

Inflate earnings to maximize the indicated value Convert GAAP statements to cash-basis tax statements Remove non-operating, non-recurring, and discretionary items so the metric reflects ongoing economic earning capacity Eliminate all depreciation from the income statement

Correct Answer:

Remove non-operating, non-recurring, and discretionary items so the metric reflects ongoing economic earning capacity

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