Certified Residential Appraiser Practice Exam

What does the term "going concern value" encompass?

1. The value of real property only

2. The value of personal property and goodwill

3. The value of an established business and real property

4. The valuation only of tangible assets

The correct answer is: The value of an established business and real property

The term "going concern value" refers to the value of an established business that is currently operational and generating revenue. This encompasses not just the physical assets such as real property, machinery, and equipment, but also the intangible assets which include goodwill, brand reputation, customer relationships, and other elements that contribute to the business's operational efficiency and profitability. Focusing on the broader context of what constitutes a going concern, option C is correct because it recognizes that an operating business possesses value beyond just its tangible assets or real property alone. An established business has synergies and a customer base that contribute significantly to its overall valuation. This contrasts with other choices, which either limit the assessment to only real property or tangible assets, or exclude the important aspects of personal property and goodwill that are central to the concept of going concern value.