Valuation Midterm Review

1. Pertains to how much a particular object is worth to a particular set of eyes*

1 point

price
Value
Cost
Fundamentals

2. Valuation places great emphasis on the _______ that are associated in the exercise.*

1 point

Professional judgment
Human reasoning
Professional skeptism
Due diligence.

3. The value of a business can be basically linked to three major factors except...*

1 point

current operations
Future prospect
Embedded Risk
Intrinsic value

4. One major factor linked to the value of business that shows how is trhe operating
performance of the firm in the recent year.*
1 point

Current operations
Future prospect
Embedded risks
all of the above

5.One majot factor linked to the value of business that reflects what is the long-term and
strategic decision of the company.*

1 point

Current operation
Future propects
Embedded risks
all of the above

6. One of the major linked to the value of business that shows what are the business
risks involved in running the businesss.*

1 point

Current operations
Future prospect
Embedded risks
all of the above

7. ____ refers to the value of any asset based on the assumption assuming there is a
hypothetically complete understanding of its investments characteristics.*

1 point

Going concern value

 Liquidation value
Intrinsic value
Fair market value

8. _____ particularlyrelevan for companies who are experiencing a severe financial

distress*

1 point

Going concern value

Liquidation value
intrinsic value
Fair market value

9. Value is determined under the going concern assumption.*

1 point

Going concern value

Liquidation value
Intrinsic value
Fair market value

10. The relevance of valuation in ____ laargely depends on the investment objectives of
the investors or financial managers managing the investment portfolio.*

1 point

Portfolio Managemant
Fundamental management
Financial management
investment management
11. These are persons who are interested in understanding and measuring the intrinsic
value of a firm.*

1 point

Fundamental analyst
Activist investors
Chartists
Information traders

12. ____ refer to the characteristics of an entity related to its financial strength,
profitability or risk appetite*

1 point

Intrinsic vaalue
Fundamentals
technical characteristics
Financial vaalue

13. ____ tend to look for companies with good growth prospects that have poor
management*

1 point

Fundamental analysts
Activist investors
Chartists
Information traders

14. They balieve that these metrics imply investors psychology and will predict future
movements in stock prices*
1 point

Fundamental analysts
Activists investors
Chartists
Information traders

15. Under Portfolio management, the following activities can be performed through the
use of valuation techniques, except:*

1 point

Stock selection
Deducing market expectation
Both can be performed
none of the above

16. Separating a segment or component business and transforming this into a separate
legal entity whose ownership will be transfered to shareholders.*

1 point

Mergers
Acquisition
Divestiture
Spin-off

17.Sale of the major component or segment of a business(e.g. brand or product line) to

another company*

1 point

Mergers
 Acquisition
Divestiture
Spin-off

18. General terms which describes the transaction two companies combined to form a
wholly new identity*

1 point

Mergers
Acquisitions
Divestiture
Spin-off

19.Acquisition of another business by using significant debt which uses the acquired
business as collateral*

1 point

Mergers
Acquisition
Divestiture
Leveraged buy-out

20. Gnerally, the valuation process considers these steps, except*

1 point

Understanding the business

forecasting financial performance
Preparing valuation model based on forecasts
all of the abovee
Other:
21. This has been defined by the industry as transaction that would yield future
economic beneefits as a result of past transactions.*

1 point

Asset
Equity
Net assets
shares of stock

22. Receivables that are collectible after 60 days are classified as *

1 point

Current Liabilities
Non-current Liabilities
Current assetss
Option 4
Other:

23. The net book value of assets may also represents *

1 point

total share holders equity

Total assets
Total liabilities
Total long term debt

24. Book value also reflects the company's *

1 point
 Historical Value
Liquidation value
Intyrinsic value
Fair market value

25. Cost of similar assets that have the nearest equivalent valueas of the valuationdate
*

1 point

Book value
Replacement cost
Fair market value
Reproduction value

1. According to the CFA Institute, liquidation value refers to the value of a company if it
were dissolved and its assets sold individually.*

1 point

True
False

2. Liquidationvalue representss the net amount hat can b gathered if the business is
shut dowwn and all its assets are sold piecemeal.*

1 point

True
False
Other:
3. Liquidation value is the base price or the floor price for any firm valuation exercise.*

1 point

True
False

4. Liquidation value should not be used to value profitable or growing companies as this
approach does not consider growth prospects of the business.*

1 point

True
False

5. Liquidation value should be used for dying or losing companies where liquidation is
imminent to check wether profits can still be realized upon sale of the assets owned.*

1 point

True
False

6. A unique callout for liquidation value is if the firm is operating under a proprietorship
or a partnership model.*

1 point

True
False

7. Business failure is the most common reason why business close or liquidate. Early
symptoms of business failure are low or negative returns.*
1 point

True
False

8. Insolvency happens when a company cannot pay liabilities as they come due.*

1 point

True
False

9. Bankrupty is the most serious type of business failure as this happens when liabilities
become greater than asset balance.*

1 point

True
False

10. divestment can be driven by different internal factors such as mismanagement, poor
financial evaluation and decisions, failure to execute strategic plans, inadequate cash
flow planning or failure to manage working capital.*

1 point

True
False