Which value describes the value of a business as an ongoing enterprise?

• A. Replacement cost
• B. Market value
• C. Liquidation value
• D. Going concern value

Answer: (D)

Going-concern value captures what a business is worth if it continues operating as a going business, with its ongoing operations, cash flow, customer relationships, and brand driving future earnings. This perspective reflects the ability of the enterprise to generate sustainable profits over time, not just the value of its physical assets or what could be recovered if it were shut down.

Replacement cost looks at how much it would cost to recreate the business’s assets, which ignores the value of ongoing operations and earnings power. Market value is the price someone would pay in the market at a given time, which can be influenced by short-term factors and may not fully reflect future cash flows. Liquidation value is the net amount recovered if the business stops operating and sells assets quickly, typically much lower because it ignores the value of continuing operations and relationships.

Therefore, going-concern value is the best description for the value of a business as an ongoing enterprise, since it accounts for the continuing ability to generate cash flows and maintain operations.