Most business owners want to grow, attract investors, or eventually sell — but many skip the step of actually understanding what their business is worth. Valuation isn’t a one-time exercise or something reserved for big companies. It’s a decision-making tool that can reveal strengths, expose risks, and guide your next move.
This 10-question quiz will test your knowledge of valuation basics and help you spot any gaps.
1. Which of the following is not one of the three primary business valuation methods?
a) Asset-based approach.
b) Income method.
c) Market approach.
d) Capital reserves method.
2. What does the market method rely on to estimate a business’s value?
a) Asset depreciation schedules.
b) Industry forecasts and future market trends.
c) Recent sales of similar businesses and market multiples.
d) Shareholder equity and retained earnings.
3. What financial figure is commonly used in the market method to estimate business value?
a) Seller’s discretionary earnings (SDE).
b) Gross profit margin.
c) Net operating income (NOI).
d) Return on investment (ROI).
4. Which of the following is an advantage of the asset-based valuation method?
a) It always results in the highest valuation.
b) It includes future revenue projections.
c) It is simple and uses readily available accounting data.
d) It accounts for intangible assets like brand value.
5. The discounted cash flow (DCF) method is best for businesses that can:
a) Be sold within the next six months.
b) Forecast future cash flows reliably.
c) Provide high-value physical assets.
d) Operate with zero debt.
6. Why might a startup struggle with the DCF method?
a) Lack of historical data and financial records.
b) Lack of competition.
c) Too many intangible assets.
d) Overvalued inventory.
7. What is the purpose of applying a market multiple during a valuation?
a) To determine the asset liquidation value.
b) To adjust taxes owed by the company.
c) To calculate the owner's credit score.
d) To compare business value to similar sales in the industry.
8. Which certification is awarded to CPAs with business valuation expertise?
a) CFA.
b) ABV.
c) ASA.
d) CBI.
9. Which of the following is not an appropriate step to take early in a DIY business valuation?
a) Review recent sales of similar businesses in your industry.
b) Adjust your income to calculate seller’s discretionary earnings (SDE).
c) Subtract liabilities from assets to determine book value.
d) Estimate your business’s selling price based on competitor branding.
10. When is it best to work with a professional for a business valuation?
a) If you’re seeking investors or involved in legal issues.
b) Only when calculating taxes.
c) When you're preparing to hire a new manager.
d) Only after launching a new product.
Answer Key
Check out our Answer Key for the correct answers and scoring.
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