Abfm Quiz Module C

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ALL THE VERY BEST FOR YOUR

EXAMS
SAMPLE QUESTION S FOR

CAIIB
ADVANCED BUSINESS
&
FINANCIAL MANAGEMENT
(ABFM)
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every one of them for their invaluable work. We ask that everyone read the Macmillan book
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INDEX
SI No. Topic Page No
1 General Information 3
2 Syllabus 6
3 Important Question 8
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CAIIB GENERAL INFORMATION
SI NO. Mandatory Paper Elective Papers: Candidates may select

any option they like.
1 Advanced Bank Management Human Resources Management
2 Advanced Business & Risk Management

Financial Management
3 Banking Regulations and Information Technology & Digital Banking

Business Laws
4 Bank Financial Management Central Banking
5 Rural Banking
 Only current bank employees who have passed the JAIIB exam are eligible to take
the CAIIB exam.
 Exams for the CAIIB are only offered online.
 Normally, the exam is held twice a year on Sundays in May/June and
November/December.
 The exam will take two hours to complete.
Examination Pattern:
 There will be 100 objective-type multiple-choice Question s on the Question paper,

worth 100 marks. Some of the Question s will be based on case studies or case lets.
The quantity of Question s required for a subject, however, may be changed by the
Institute.
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 In certain CAIIB subjects, there might be numerical Question s for which there are
no available Answers. The candidate must key in the Answer to these Question s,
which will not follow the MCQ format.
 Negative points won't be awarded for incorrect responses.
 Exam Questions will include the following:
a. Knowledge evaluation
b. Knowledge of concepts
c. Logical and analytical explanation
d. Solving problems
e. Examining case
Passing Requirements:
 50 out of 100 is the minimum score required to pass the subject.
 Candidates will also be considered to have finished if they receive at least 45 marks in
each subject and an overall score of 50% in all exam subjects in a single attempt. The
Test.
 Until the allotted time for passing the test expires, candidates may keep their credits for
the subjects they have successfully attempted.
 Note: A candidate may take the CAIIB exam five times, but only if they register for the
exam and complete it within three years of the date of registration, whichever comes
first. It is not necessary for these five attempts to occur one after the other.
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 The "Class of Pass" requirements:
 First Class: Pass all subjects in the FIRST PHYSICAL ATTEMPT with an aggregate score of
60% or higher.
 First Class with Distinction: 60% or higher in each category overall and 70% or higher in
every participant in the FIRST ACTUAL ATTEMPT.
 Only "Pass Class" will be awarded to candidates who have been granted exemption in
one or more subjects.
 Deadline for Guidelines and Significant Developments Ahead of Exams:
 The Institute will only take into consideration instructions/guidelines issued by the
regulator(s) and significant developments in banking and finance up to December 31 for
the purpose of including them in the Question papers for the exams that will be
administered from February to July of each calendar year.
 Important developments in banking and finance up to June 30th, as well as

instructions/guidelines issued by the regulator(s), will only be taken into consideration
for inclusion in the Question papers for the exams that the Institute will administer from
August to January of each year.
➤ Exam Fees
An overview Fee
First attempt fee 5000
Second attempt fee 1300
Third attempt fee 1300
Fourth attempt fee 1300
Fifth attempt fee 1300
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SYLLABUS
The booklet contains information on the suggested syllabus, which is indicative. Though
Question s can address any pertinent topic under the subject, candidates must study all topics
falling within the purview of the subject in Question due to the professional nature of
examinations.
Even though those topics may not have been explicitly covered in the syllabus, candidates
taking the exam should especially get ready to respond to Questions about current events that
may arise under the various subjects covered in the exam.
MODULE C: VALUATION, MERGERS & ACQUISITIONS
 Corporate Valuations
 Approaches to Corporate Valuation, Adjusted Book Value Approach,
Stock and Debt Approach, Direct Comparison Approach, Discounted Cash
Flow Approach, Steps involved in valuation using DCF Approach,
 Discounted Cash Flow Valuation
 Estimating Inputs, Approaches to Discounted Cash Flow Models, Various

discounted Cash Flow Models, Dividend Discount Model, Applicability of
the Dividend Discount Model,
 Other Non-DCF valuation models
 Relative valuation model, Equity Valuation Multiples Model, , Enterprise

value multiples Model, Choosing the right multiples, Book value approach
Model, Stock and debt approach
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 Special cases of valuation
 Intangibles –Brand, Human valuation etc., Real estate Firms, Start-up firms,
Firms with negative or low earnings, Financial Service companies, Distressed
firms, Valuation of cash and cross holdings, Warrants and convertibles, Cyclical &
non-cyclical companies, Holding companies, E-commerce firms
 Mergers, Acquisitions and Restructuring
o Types of Transactions, Reasons for Merger, Mechanics of a Merger, Costs and

Benefits of a Merger, Exchange Ratio in a Merger, Purchase of a Division / Plant,
Takeovers, Leveraged Buyouts, Acquisition Financing, Business Alliances,
Managing Acquisitions, Divestitures, Holding Company, Demergers Deal
structuring and financial strategies Negotiations, Payment and legal
considerations, Tax and accounting considerations, Tax reliefs and benefits in
case of Amalgamation in India, Financial reporting of business combinations,
Deal Financing, Financing of cross border acquisitions in India
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CHAPTER 13 :- Corporate Valuations
1) What does WACC stand for in the context of 5) In Illustration 1, what is the cost of Capital for
finance? Preference Shares?
A. Weighted Average Capital Cost
A. 8%
B. Weighted Average Cost of Credit
B. 9%
C. Weighted Average Cost of Capital
C. 15%
D. Weighted Asset Cost Calculation
D. 0.0045
Answer: C. Weighted Average Cost of Capital
Answer: B. 9%
6) What is the Weighted Average Cost of Capital

2) What does "rd" represent in the formula for
in Illustration 1?
WACC?
A. 0.036
A. After-tax cost of preference shares
B. 0.0045
B. Cost of equity shares
C. 0.075
C. After-tax cost of debt
D. 0.1155
D. Cost of debt
Answer: D. 0.1155
Answer: C. After-tax cost of debt
7) What is the debt equity ratio for ANC Limited
3) How is the weighted average cost of capital
in Illustration 2?
calculated in the given formula?
A. 25:75
A. wdrd + wprp + werp
B. 75:25
B. wd(rd) + wp(rp) + we(re)
C. 10%
C. wd + wp + we
D. 13%
D. rd + rp + re
Answer: A. 25:75
Answer: B. wd(rd) + wp(rp) + we(re)
8) What is the Cost of Debt Before Tax for the
4) In Illustration 1, what is the weight assigned
amount beyond Rs. 2,00,000 in Illustration 2?
to Equity Shares?
A. 10%
A. 45%
B. 13%
B. 5%
C. Rs. 60
C. 50%
D. Rs. 12
D. 15%
Answer: B. 13%
Answer: C. 50%
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9) What is the expected growth rate (G) in A. 75(D):25(E)

dividend for ANC Limited in Illustration 2? B. 25(D):75(E)
C. Rs. 20,00,000
A. 50% D. Rs. 5,00,000
B. 10% Answer: B. 25(D):75(E)
C. 20%
D. 30% 14) What is the total amount of Debt raised by
Answer: B. 10% ANC Limited in Illustration 2?
10) What is the Dividend Pay-out for ANC A. Rs. 20,00,000

Limited in Illustration 2? B. Rs. 5,00,000
C. Rs. 15,00,000
A. 50% of earnings D. Rs. 4,00,000
B. 30% Answer: B. Rs. 5,00,000
C. Rs. 20,00,000
D. Rs. 4,00,000 15) What is the total amount of Equity raised by
Answer: A. 50% of earnings ANC Limited in Illustration 2?
11) What is the Shareholder's Personal Tax Rate A. Rs. 20,00,000

for ANC Limited in Illustration 2? B. Rs. 5,00,000
C. Rs. 15,00,000
A. 10% D. Rs. 4,00,000
B. 20% Answer: C. Rs. 15,00,000
C. 30%
D. 50% 16) What is the Post-Tax Average Cost of
Answer: B. 20% Additional Debt for ANC Limited in Illustration 2?
12) What is the Current Market Price (MP) per A. 8.26%

Share for ANC Limited in Illustration 2? B. 10%
C. 13%
A. Rs. 60 D. 5%
B. Rs. 12 Answer: A. 8.26%
C. Rs. 20,00,000
D. Rs. 4,00,000
Answer: A. Rs. 60
13) What is the pattern of raising capital for ANC

Limited in Illustration 2?
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17) How much is the Additional Equity raised by A. 16.27%

ANC Limited in Illustration 2? B. 10%
C. 30%
A. Rs. 20,00,000 D. 50%
B. Rs. 5,00,000 Answer: A. 16.27%
C. Rs. 11,00,000
D. Rs. 4,00,000 22) How much is the Equity amount for ANC
Answer: C. Rs. 11,00,000 Limited in Illustration 2?
18) What is the Total Interest paid for ANC A. Rs. 20,00,000
Limited's Debt in Illustration 2? B. Rs. 5,00,000
C. Rs. 11,00,000
A. Rs. 20,000 D. Rs. 4,00,000
B. Rs. 39,000 Answer: C. Rs. 11,00,000
C. Rs. 2,00,000
D. Rs. 3,00,000 23) What is the Cost of Debt After Tax for ANC
Answer: B. Rs. 39,000 Limited in Illustration 2?
19) What is the Cost of Equity for ANC Limited in A. 8.26%

Illustration 2? B. 10%
C. 13%
A. 10% D. 5%
B. 20% Answer: A. 8.26%
C. 30%
D. 50% 24) How much is the Retained Earnings amount
Answer: B. 20% for ANC Limited in Illustration 2?
20) How is the Cost of Retained Earnings A. Rs. 20,00,000

calculated for ANC Limited in Illustration 2? B. Rs. 5,00,000
C. Rs. 11,00,000
A. CR = CE × TP D. Rs. 4,00,000
B. CR = CE × (1 – TP) Answer: B. Rs. 4,00,000
C. CR = CE + TP
D. CR = CE - TP
Answer: B. CR = CE × (1 – TP)
21) What is the Weighted Average Cost of

Capital (CO) for ANC Limited in Illustration 2?
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25) What is Corporate Valuation? D. Number of outstanding shares.

Answer: B. Balance Sheet and financials.
A. Determining market value
B. Determining book value 29) What is Corporate Valuation?
C. Determining the value of a company entity
D. Determining personal value A. Determining market value
Answer: C. Determining the value of a B. Determining book value
company entity C. Determining the value of a company entity
D. Determining personal value
26) What does Market Value represent? Answer: C. Determining the value of a
company entity
A. Value derived from financial statements.
B. Value derived from the analysis of the market. 30) How is Book Value defined?
C. Value established by the books of the
company. A. The value of an asset or business entity
D. Value determined by the number of established by market analysis.
outstanding shares. B. The value of an asset or business entity as
Answer: B. Value derived from the analysis established by financials or the Balance Sheet.
of the market. C. The value derived from the market
capitalization.
27) How is Market Capitalization calculated? D. The value derived from the number of
outstanding shares.
A. Number of outstanding shares multiplied by Answer: B. The value of an asset or business
the book value. entity as established by financials or the Balance
B. Number of outstanding shares divided by the Sheet.
share price.
C. Number of outstanding shares multiplied by 31) What does Market Value represent?
the share price.
D. Number of outstanding shares minus the A. Value derived from financial statements.
share price. B. Value derived from the analysis of the market.
Answer: C. Number of outstanding shares C. Value established by the books of the
multiplied by the share price. company.
D. Value determined by the number of
28) Where is Book Value derived from? outstanding shares.
Answer: B. Value derived from the analysis
A. Market analysis. of the market.
B. Balance Sheet and financials.
C. Market capitalization.
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32) How is Market Capitalization calculated? C. It reflects the worth of an entity's running
assets more closely.
A. Number of outstanding shares multiplied by D. It excludes non-operating liabilities.
the book value. Answer: C. It reflects the worth of an entity's
B. Number of outstanding shares divided by the running assets more closely.
share price.
C. Number of outstanding shares multiplied by 36) What does "debts and other obligations"
the share price. include in enterprise value?
D. Number of outstanding shares minus the
share price. A. Only short-term debts
Answer: C. Number of outstanding shares B. Long-term debts and preferred securities
multiplied by the share price. C. Current portion of long-term debts, capital
lease obligations, preferred securities, and other
33) Where is Book Value derived from? non-operating liabilities
D. Only non-controlling interests
A. Market analysis. Answer: C. Current portion of long-term
B. Balance Sheet and financials. debts, capital lease obligations, preferred
C. Market capitalization. securities, and other non-operating liabilities
D. Number of outstanding shares.
Answer: B. Balance Sheet and financials. 37) What is the formula for determining
enterprise value?
34) What does "enterprise value" or "firm value"
include? A. Market capitalization minus cash and cash
equivalents
A. Only equity value B. Equity value minus debts
B. Complete company value, including debts and C. Equity value plus long-term debts
other commitments D. Equity value plus short-term debts, long-term
C. Only short-term debts debts, and other obligations minus cash and
D. Only long-term debts cash equivalents
Answer: B. Complete company value, Answer: D. Equity value plus short-term
including debts and other commitments debts, long-term debts, and other obligations
minus cash and cash equivalents
35) Why is enterprise value considered
significant?
A. It approximates the market capitalization.

B. It represents the value of equity only.
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38) What does "enterprise value" fundamentally Answer: C. They are held accountable
represent?
42) Why is understanding business valuation
A. Only equity value essential for top management?
B. Value of running assets
C. Market capitalization A. To avoid accountability
D. Debts only B. To complicate financial strategies
Answer: B. Value of running assets C. To minimize shareholder involvement
D. To understand what factors into value and
how to quantify it
39) Why is business valuation considered crucial Answer: D. To understand what factors into
for management? value and how to quantify it
A. To minimize the value of the firm 43) Why has business valuation become
B. To estimate the effects of various strategies increasingly relevant in today's business world?
on the value of the firm
C. To focus on academic subjects A. Due to a decrease in globalisation
D. To avoid accountability for management B. Due to economic liberalisation
Answer: B. To estimate the effects of various C. Due to the avoidance of corporate
strategies on the value of the firm reorganisation
D. Due to a decrease in strategic alliances
40) What is the primary focus of effective Answer: B. Due to economic liberalisation
financial management?
44) What is the primary objective of valuation?
A. Maximizing complexity
B. Minimizing shareholder value A. Minimizing the company's worth
C. Optimizing value creation for shareholders B. Estimating the number of employees
D. Avoiding globalisation C. Determining appropriate tariff levels
Answer: C. Optimizing value creation for D. Estimating a company's true worth in the
shareholders current market
Answer: D. Estimating a company's true
41) What happens if management cannot worth in the current market
increase the value for shareholders?
A. They are praised for their efforts

B. They are not held accountable
C. They are held accountable
D. They receive academic awards
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45) How does the United States Internal A. It minimizes the worth of the company
Revenue Service (IRS) define fair market value? B. It maximizes employee stock options
C. It provides a standard definition for evaluating
A. The highest price in the market property value
B. The lowest price in the market D. It avoids regulatory scrutiny
C. The price at which property would change Answer: C. It provides a standard definition
hands between a willing buyer and a willing for evaluating property value
seller
D. The average market price
Answer: C. The price at which property 49) Who is responsible for developing the
would change hands between a willing buyer International Valuation Standards (IVS)?
and a willing seller
A. International Monetary Fund (IMF)
46) According to the IRS, what conditions define B. International Assets Valuation Standards
a fair market value transaction? Committee
C. World Bank
A. The buyer is under compulsion to buy D. Securities and Exchange Commission (SEC)
B. The seller is under compulsion to sell Answer: B. International Assets Valuation
C. Both parties have reasonable knowledge of Standards Committee
irrelevant facts
D. Both parties are willing, and neither is under 50) According to IVS 105 Valuation Approaches
compulsion to buy or sell and Methods, what must be given due
Answer: D. Both parties are willing, and consideration in corporate valuation?
neither is under compulsion to buy or sell
A. Historical data
47) When evaluating the worth of a corporation, B. Market trends
what are the buyer and seller actually selling? C. Valuation approaches that are pertinent and
appropriate
A. Physical assets D. Financial statements
B. Claims that each stakeholder in the firm has Answer: C. Valuation approaches that are
on the company pertinent and appropriate
C. Intellectual property
D. Employee stock options
Answer: B. Claims that each stakeholder in
the firm has on the company
48) Why is the concept of fair market value

important in valuation?
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51) What are the economic concepts that the

primary valuation approaches are founded on, A. By comparing it to recent transactions
as per IVS 105? B. By evaluating the fair market value of net
assets
A. Price equilibrium, anticipation of benefits, or C. By determining the present value of expected
substitution future earnings or cash flows
B. Supply and demand, revenue generation, and D. By analyzing market trends and competition
cost analysis Answer: C. By determining the present value
C. Monetary policy, inflation rates, and interest of expected future earnings or cash flows
rates
D. Industry competition, technological 55) What is the other name for the Cost
advancements, and market share Approach in corporate valuation?
Answer: A. Price equilibrium, anticipation of
benefits, or substitution A. Market Approach
B. Asset-Based Approach
52) What is the market approach in corporate C. Income Approach
valuation? D. Equity-Based Approach
Answer: B. Asset-Based Approach
A. A method based on historical stock prices
B. A method that considers market trends and 56) What does the Cost Approach extract value
competition from in corporate valuation?
C. A method focused on financial statements
D. A method that solely relies on book value A. Historical stock prices
Answer: B. A method that considers market B. Present market value
trends and competition C. Fair Market Value of the company's net assets
D. Future cash flows
53) What is the primary consideration in the Answer: C. Fair Market Value of the
Market Approach to corporate valuation? company's net assets
A. Historical stock prices 57) What is the primary factor to consider when
B. Size, quantity, and quality of assets selecting a valuation approach?
C. Book value of assets
D. Market share of the company A. Popularity of the approach
Answer: B. Size, quantity, and quality of B. Nature of the asset
assets C. Cost-effectiveness
D. Historical success rate
54) How does the Income Approach determine Answer: B. Nature of the asset
the value of a company?
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C. Relevant basis of value, premise of value, and

58) In the Cost Approach, how does the specific conditions
methodology determine the worth of a firm? D. Only the purpose of the valuation
Answer: C. Relevant basis of value, premise
A. Based on recent market trends of value, and specific conditions
B. By analyzing competitors
C. On the value of the assets held by the 62) How does the Income Approach calculate
business the net operating income (NOI) of a company?
D. By evaluating historical stock prices
Answer: C. On the value of the assets held A. By dividing future cash flows by the rate of
by the business capitalization
B. By evaluating recent transactions in the
59) For which type of businesses is the Cost market
Approach particularly helpful? C. By comparing the company to its competitors
D. By determining the fair market value of net
A. Service-oriented businesses assets
B. Technology companies Answer: A. By dividing future cash flows by
C. Asset-intensive businesses the rate of capitalization
D. Start-ups
Answer: C. Asset-intensive businesses
60) What is the primary objective when selecting 63) In what circumstances might a valuer not be
a valuation approach? required to use more than one method for
valuation?
A. To use the most popular approach
B. To find the approach suitable for specific A. When the valuation is for a property
conditions B. When the valuer is highly confident in a single
C. To choose the least expensive approach method
D. To adopt the approach with the highest C. When the market trends are stable
historical success rate D. When the valuation is for a start-up
Answer: B. To find the approach suitable for Answer: B. When the valuer is highly
specific conditions confident in a single method
61) What criteria should be considered during

the selection process of a valuation approach?
A. Historical stock prices and market trends

B. The popularity of the approach
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64) What should valuers consider when deciding C. Direct Comparison Approach
whether to use multiple approaches or D. Discounted Cash Flow Approach
methods? Answer: D. Discounted Cash Flow Approach
A. Only the purpose of the valuation 68) What is the primary factor to consider when
B. The popularity of each method selecting a valuation approach?
C. The nature of the asset and market trends
D. The cost-effectiveness of each method A. Popularity of the approach
Answer: C. The nature of the asset and B. Nature of the asset
market trends C. Cost-effectiveness
D. Historical success rate
65) What is a crucial factor in determining the Answer: B. Nature of the asset
appropriateness of a valuation method?
69) In what circumstances might a valuer not be
A. Popularity of the method required to use more than one method for
B. Accuracy and reliability of information valuation?
C. Cost-effectiveness
D. Historical success rate A. When the valuation is for a property
Answer: B. Accuracy and reliability of B. When the valuer is highly confident in a single
information method
C. When the market trends are stable
66) When valuing a property, what does the text D. When the valuation is for a start-up
suggest about the use of multiple valuation Answer: B. When the valuer is highly
methods? confident in a single method
A. Multiple methods are essential 70) What is the Adjusted Book Value Approach
B. Only one method is suitable primarily based on?
C. It depends on the market conditions a. Income statement
D. Popularity of the method is crucial b. Cash flow statement
Answer: B. Only one method is suitable c. Balance sheet
d. Statement of retained earnings
Answer: c. Balance sheet
67) Which valuation approach involves
estimating the present value of a firm's expected
future cash flows?
A. Adjusted Book Value Approach

B. Stock and Debt Approach
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71) In the context of the Adjusted Book Value a. $11.50

Approach, what does "Gross Block" represent? b. $24.30
a. Net value of assets c. $41.90
b. Total liabilities d. $63.00
c. Gross value of each asset at the beginning of Answer: a. $11.50
the financial year
d. Accumulated depreciation 76) What is the total value of Current Assets,
Answer: c. Gross value of each asset at the Loans, and Advances?
beginning of the financial year a. $41.90
b. $19.40
72) How can the total value of a company's c. $63.00
assets be determined using the Adjusted Book d. $116.40
Value Approach? Answer: a. $41.90
a. By analyzing the income statement
b. By performing a direct tally of book values 77) What is the total value of Receivables on the
c. By examining the cash flow statement balance sheet?
d. By subtracting claims from the gross block a. $25.00
Answer: b. By performing a direct tally of b. $15.00
book values c. $3.50
d. $6.50
73) What is the total value of Fixed Assets (Net) Answer: a. $25.00
on the company's balance sheet?
a. $63.00 78) How much is the total value of Inventories
b. $85.00 on the company's balance sheet?
c. $43.00 a. $11.50
d. $22.00 b. $15.00
Answer: a. $63.00 c. $0.50
d. $3.50
74) What is the Gross Block of the company's Answer: b. $15.00
Fixed Assets?
a. $85.00 79) What is the total value of Cash and Bank
b. $63.00 Balances?
c. $43.00 a. $1.40
d. $22.00 b. $3.50
Answer: a. $85.00 c. $41.90
d. $116.40
75) How much is the total value of Investments Answer: a. $1.40
on the balance sheet?
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80) What is the total value of Share Capital on b. Inflation

the balance sheet? c. Historical cost
a. $21.00 d. Reserves and Surplus
b. $45.00 Answer: b. Inflation
c. $97.00
d. $116.40 85) How is the book value of an asset calculated
Answer: b. $45.00 in the context of the passage?
a. By subtracting depreciation from historical
81) According to the passage, what is subtracted cost
from Total Assets to calculate the value of b. By adding inflation to market value
Investor Claims? c. By multiplying current liabilities by total assets
a. Secured Loans d. By dividing total assets by secured loans
b. Reserves and Surplus Answer: a. By subtracting depreciation from
c. Current Liabilities and Provisions historical cost
d. Unsecured Loans
Answer: c. Current Liabilities and Provisions 86) What is the total value of Reserves and
Surplus on the balance sheet?
82) What is the total value of Unsecured Loans a. $21.00
on the balance sheet? b. $45.00
a. $19.40 c. $97.00
b. $6.50 d. $116.40
c. $24.30 Answer: a. $21.00
d. $45.00
Answer: b. $6.50 87) According to the passage, what is directly
proportional to the degree of precision in the
83) According to the passage, what factor book value approach?
influences the degree of precision in the book a. Total Assets
value approach? b. Reserves and Surplus
a. Historical cost c. Historical cost accuracy
b. Market competition d. Inflation impact
c. Inflation Answer: c. Historical cost accuracy
d. Reserves and Surplus
Answer: c. Inflation
84) What is mentioned as a potential cause for a

discrepancy between book prices and market
values in the passage?
a. Market competition
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88) What is identified as a factor influencing 92) What is mentioned as one of the essential
market value that is not taken into account by aspects of organizational capital in the passage?
the book value approach? a. Historical cost
a. Historical cost b. Market value
b. Inflation c. Inflation impact
c. Reserves and Surplus d. Inseparability from the company as a
d. Depreciation functioning entity
Answer: b. Inflation Answer: d. Inseparability from the company
as a functioning entity
89) According to the passage, why might some
essential assets become obsolete before 93) According to the passage, what is
depreciation takes place? organizational capital associated with?
a. Inflation a. Share Capital
b. Market competition b. Accumulated Depreciation
c. Technological advancements c. Information/knowledge embodied in
d. Organizational capital employees
Answer: c. Technological advancements d. Unsecured Loans
Answer: c. Information/knowledge
90) What is described as an extremely important embodied in employees
form of capital that is not shown on the balance
sheet? 94) How can companies utilize resources more
a. Share Capital efficiently and gain a competitive advantage,
b. Reserves and Surplus according to the passage?
c. Organizational capital a. By increasing Share Capital
d. Unsecured Loans b. Through market competition
Answer: c. Organizational capital c. By implementing business practices that
enhance the knowledge embodied in employees
91) How is value added to organizational capital, d. By decreasing Reserves and Surplus
according to the passage? Answer: c. By implementing business
a. Through market competition practices that enhance the knowledge embodied
b. By constant technological advancements in employees
c. Through mutually advantageous relationships
involving employees, customers, and suppliers
d. By subtracting current liabilities from total
assets
Answer: c. Through mutually advantageous
relationships involving employees, customers,
and suppliers
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95) What is mentioned as a characteristic of Answer: b. It is the estimation of intrinsic

organizational capital in the passage? worth, likely free from prejudice.
a. Constant disassociation from the company
b. Unaffected by technological advancements 99) In the example provided, what is the market
c. Readily shown on the balance sheet value of Seashore Limited's equity per share?
d. Inability to be disassociated from the a. Rs. 7.50 Crore
company as a functioning entity b. Rs. 50
Answer: d. Inability to be disassociated from c. Rs. 15 Crore
the company as a functioning entity d. Rs. 14.80 Crore
Answer: b. Rs. 50
96) What is the stock and debt approach
primarily based on? 100) How many outstanding shares does
a. Balance sheet Seashore Limited have in the example?
b. Income statement a. 7.50 Crore
c. Market value of outstanding securities b. 15 Crore
d. Reserves and Surplus c. 15 lakh
Answer: c. Market value of outstanding d. 14.80 Crore
securities Answer: c. 15 lakh
97) What is the fundamental assumption that 101) According to the example, what is the
underpins the market-based approach, as market valuation of Seashore Limited's
mentioned in the passage? outstanding debt?
a. Historical cost accuracy a. Rs. 7.50 Crore
b. Efficiency of the market b. Rs. 50
c. Technological advancements c. Rs. 15 Crore
d. Organizational capital d. Rs. 14.80 Crore
Answer: b. Efficiency of the market Answer: d. Rs. 14.80 Crore
98) According to the passage, what does the

efficiency of the market imply about the market
value of an asset?
a. It is biased and influenced by external factors.
b. It is the estimation of intrinsic worth, likely
free from prejudice.
c. It is disconnected from the company's
performance.
d. It is solely based on historical cost.
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102) What is the efficiency of the market 106) According to the passage, what do some
assumption's role in the stock and debt appraisers believe is a more accurate measure of
approach? the company's underlying value?
a. It biases market values. a. Historical cost
b. It underestimates the worth of securities. b. Market value on the lien date
c. It ensures unbiased estimation of intrinsic c. Average prices over a period of time
worth. d. Book value of equity
d. It disconnects market value from the Answer: c. Average prices over a period of
company's equity. time
Answer: c. It ensures unbiased estimation of
intrinsic worth. 107) The passage suggests that the rationality of
taking an average is dependent on what factor?
103) What does adding the market value of the a. Historical cost accuracy
company's debt to the market value of equity b. Market competition
result in? c. Stock market efficiency
a. Total liabilities d. Volatility of stock prices
b. Total assets Answer: c. Stock market efficiency
c. Total market value of the company
d. Historical cost of assets 108) Question 39. According to the efficient
Answer: c. Total market value of the market hypothesis, what is a significant
company implication for the stock and debt technique?
a. It is unreliable in all situations.
104) According to the passage, what is the total
b. It will yield the most reliable estimate of
value of the company as of March 31, 2022?
value.
a. Rs. 22.30 Crore
c. It is accurate only for debt valuation.
b. Rs. 50
d. It requires historical cost adjustment.
c. Rs. 15 Crore
Answer: b. It will yield the most reliable
d. Rs. 14.80 Crore
estimate of value.
Answer: a. Rs. 22.30 Crore
105) What is the key controversy mentioned in 109) Question 40. According to the passage,
the passage regarding the stock and debt what happens to the accuracy of the valuation
strategy? proposal if an average of prices over time is
a. Determining the market value of equity shares taken?
b. Calculating the historical cost of assets a. It is enhanced.
c. Valuing liabilities b. It remains the same.
d. Assessing the efficiency of the stock market c. It is unaffected.
Answer: a. Determining the market value of d. It is harmed.
equity shares Answer: d. It is harmed.
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110) What is the efficient market hypothesis's 114) How does the passage characterize the
stance on valuing securities using an average of accuracy of valuation proposals when using an
prices over time? average of prices over time?
a. It supports the practice. a. Unaffected
b. It discourages the practice. b. Enhanced
c. It is indifferent to the practice. c. Harmed
d. It requires further analysis. d. Optimized
Answer: b. It discourages the practice. Answer: c. Harmed.
111) Question 42. What is the crucial factor in 115) What is the recommended sequence for
determining the reliability of the estimate of adjustments in unit price ?
value, according to the passage? a. Always start with legal permissibility
a. Historical cost adjustment adjustments.
b. The market price on the lien date b. Begin with financial viability adjustments.
c. Averaging prices over time c. Initiate with time adjustments, then add other
d. Volatility of stock prices adjustments.
Answer: b. The market price on the lien date d. Prioritize observable qualities adjustments.
Answer: c. Initiate with time adjustments,
112) According to the passage, what is the then add other adjustments.
impact of using the market price on the lien date
for valuation? 116) What factors are considered in the first
a. Enhanced accuracy step of real estate valuation using the Direct
b. Unreliable estimate Comparison Approach?
c. Indifferent accuracy a. Inherent qualities only
d. Historical cost adjustment b. Physical circumstances only
Answer: a. Enhanced accuracy c. Legal permissibility, financial viability, physical
circumstances, and maximal productivity
113) What is the primary focus of the efficient d. Financial viability and legal permissibility only
market hypothesis in terms of valuation Answer: c. Legal permissibility, financial
practices? viability, physical circumstances, and maximal
a. Average market prices productivity
b. Historical cost adjustment
c. Market price on the lien date
d. Reliability of the estimate of value
Answer: c. Market price on the lien date
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117) What is the purpose of identifying similar 120) What is the purpose of identifying similar
companies in the context of business valuation companies in the context of business valuation
using the Direct Comparison Approach? using the Direct Comparison Approach?
a. To determine the financial viability of the a. To determine the financial viability of the
business business
b. To find comparable sales data b. To find comparable sales data
c. To evaluate legal permissibility c. To evaluate legal permissibility
d. To assess inherent qualities of the business d. To assess inherent qualities of the business
Answer: b. To find comparable sales data Answer: b. To find comparable sales data
118) Question 4. In the second step of real 121) In the second step of real estate valuation
estate valuation using the Direct Comparison using the Direct Comparison Approach, what
Approach, what kind of data does the valuer aim kind of data does the valuer aim to find?
to find? a. Data related to the property's legal
a. Data related to the property's legal permissibility
permissibility b. Data about sales that are comparable to the
b. Data about sales that are comparable to the one being appraised
one being appraised c. Data on the financial viability of the property
c. Data on the financial viability of the property d. Data on the physical circumstances of the
d. Data on the physical circumstances of the property
property Answer: b. Data about sales that are
Answer: b. Data about sales that are comparable to the one being appraised
comparable to the one being appraised
122) What is a crucial criterion for a property to
119) What factors are considered in the first be considered a comparable sale?
step of real estate valuation using the Direct a. Similar amenities
Comparison Approach? b. Different highest and best use
a. Inherent qualities only c. Different geographic area
b. Physical circumstances only d. Lack of a proven track record
c. Legal permissibility, financial viability, physical Answer: a. Similar amenities
circumstances, and maximal productivity
d. Financial viability and legal permissibility only
Answer: c. Legal permissibility, financial
viability, physical circumstances, and maximal
productivity
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123) What is highlighted as essential for the best 126) What is the purpose of altering comparable
possible outcome in real estate valuation using sales values in the final stage of the Direct
the Direct Comparison Approach? Comparison Approach?
a. Varying highest and best use a. To make them identical to the subject
b. Proven track record of sales property
c. Different geographic areas b. To ensure they reflect greater or inferior
d. Divergent amenities qualities than those of the subject property
Answer: b. Proven track record of sales c. To ignore the qualities of the similar
properties
124) What technique is mentioned for valuing a d. To prioritize size and form over other qualities
company using the Direct Comparison
Approach? Answer: b. To ensure they reflect greater or
a. Multiple regression analysis inferior qualities than those of the subject
b. Time-series analysis property
c. Utilizing a multiple based on the price-
earnings ratio 127) According to the passage, what elements
d. Asset-based valuation need to be considered when making changes to
comparable sales values?
Answer: c. Utilizing a multiple based on the a. Historical cost and market value
price-earnings ratio b. Size, form, topography, available facilities, and
locational qualities
125) What is the underlying notion behind the c. Legal permissibility and financial viability
technique of valuing companies within a sector d. Average industry multiples
using a multiple? Answer: b. Size, form, topography, available
a. Companies within a sector are not facilities, and locational qualities
comparable.
b. Companies within a sector have identical 128) In the valuation process of a company,
characteristics. what do analysts attempt to control for?
c. Companies within a sector differ greatly from a. Size and form
one another. b. Differences between different companies
d. The average for the sector is representative of c. Locational qualities only
the most common type of company. d. Average industry multiples
Answer: d. The average for the sector is
representative of the most common type of Answer: b. Differences between different
company. companies
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129) Why do analysts attempt to control for b. To adjust the value of the comparable
differences between different companies in the property to make it more comparable to the
valuation process? subject property
a. To eliminate all differences and make all c. To determine the value of the subject
companies identical property
b. To ensure that the company being valued is d. To compare the characteristics of the subject
unique in the industry property with the comparable property
c. Recognition of significant differences between Answer: b. To adjust the value of the
the company being valued and others in the comparable property to make it more
comparable firm group comparable to the subject property
d. To prioritize size and form over other qualities
Answer: c. Recognition of significant 133) According to the passage, what is the first
differences between the company being valued step the valuer takes in the direct comparison
and others in the comparable firm group method for real estate valuation?
a. Adjusting the value of the comparable
130) In the example provided, why might a property
company trade at a higher multiple of earnings b. Determining the characteristics of the subject
than the average for its industry? property
a. Because it has a lower expected growth rate c. Appraising the recently sold house next door
b. Because it has a smaller size d. Determining the characteristics of the
c. Because it has a higher expected growth rate comparable property
d. Because it has fewer available facilities Answer: d. Determining the characteristics
Answer: c. Because it has a higher expected of the comparable property
growth rate
134) What does the valuer do after determining
131) What is the owner's argument for a higher the characteristics of the comparable property?
valuation of the flat being appraised? a. Adjust the value of the subject property
a. The flat has more privacy b. Appraise the subject property
b. The flat has balconies on two sides c. Compare those features to the characteristics
c. The flat is a corner flat of the subject property
d. All of the above d. Adjust the value of the comparable property
Answer: d. All of the above Answer: c. Compare those features to the
characteristics of the subject property
132) In the scenario provided, what is the
valuer's role in using the recently sold house
next door as a comparable property?
a. To appraise the recently sold house next door
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135) According to the scenario, what factors a. It provides a more accurate estimate of the
does the valuer consider in adjusting the value subject property's value.
of the comparable property? b. It makes the subject property less comparable
a. Inflation and market conditions to other properties.
b. Size and form of the comparable property c. It adjusts for inflation.
c. Characteristics of the subject property d. It eliminates the need for adjustments in the
d. Legal permissibility of the properties valuation process.
Answer: c. Characteristics of the subject Answer: a. It provides a more accurate
property estimate of the subject property's value.
136) What is the goal of adjusting the value of 139) In the given valuation methodology chart,
the comparable property in the direct what is the listed price of the comparable
comparison method? property?
a. To inflate the value of the subject property a. Rs. 5 Crore
b. To make it less comparable to the subject b. Rs. 7 Crore
property c. Rs. 8 Crore
c. To make it more comparable to the subject d. Rs. 10 Crore
property Answer: b. Rs. 7 Crore
d. To ignore the characteristics of the subject
property 140) According to the chart, what adjustment is
Answer: c. To make it more comparable to made to the valuation for the characteristic of
the subject property privacy?
a. Subtraction of 5%
137) According to the passage, what should the b. Addition of 5%
adjusted value of the comparable property be c. No adjustment
roughly equivalent to? d. Pro-rate increase
a. The original value of the comparable property Answer: b. Addition of 5%
b. The value determined for the subject property
c. The inflation-adjusted value of the 141) What adjustment is made to the valuation
comparable property for the characteristic of carpet area in relation to
d. The market value of the subject property the comparable property?
Answer: b. The value determined for the a. Pro-rate increase
subject property b. Subtraction
c. No adjustment
138) What is the significance of the valuer d. Addition
evaluating other recently sold properties similar Answer: a. Pro-rate increase
to the flat being appraised?
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142) According to the chart, how is the valuation d. To eliminate the need for adjustments in the
adjusted for the characteristic of balconies in valuation process
relation to the comparable property? Answer: c. To make the comparable
a. Subtraction of 5% property more like the subject property
b. Addition of 5%
c. No adjustment 146) According to the chart, what is the guiding
d. Pro-rate increase principle for the adjustment process in the
Answer: b. Addition of 5% valuation methodology?
a. Subtract for each superior characteristic
143) What is the general principle mentioned in b. Add for each superior characteristic
the chart for adjusting the value of the c. No adjustment needed
comparable property to make it more like the d. Adjust based on historical cost
subject property? Answer: b. Add for each superior
a. Subtract an amount for each superior characteristic
characteristic
b. Add an amount for each superior 147) What is the impact on the value of the
characteristic subject property if it lacks a feature present in
c. No adjustment needed the comparable property?
d. Adjust based on market conditions a. The value should be increased.
Answer: b. Add an amount for each superior b. The value should remain the same.
characteristic c. The value should be decreased.
d. The value should be doubled.
144) According to the chart, what is the Answer: c. The value should be decreased.
adjustment made for the characteristic of
privacy in the comparable property? 148) According to the passage, why is it essential
a. Subtraction of 5% to obtain information from various sources for
b. Addition of 5% both the subject property and comparable
c. No adjustment properties?
d. Pro-rate increase a. To eliminate the need for adjustments in the
Answer: a. Subtraction of 5% valuation process.
b. To make the comparable property less like the
145) What is the purpose of the adjustments subject property.
made in the valuation methodology chart? c. To ensure a speedy and uncomplicated
a. To decrease the value of the subject property valuation.
b. To make the comparable property less like the d. To compare characteristics accurately.
subject property Answer: d. To compare characteristics
c. To make the comparable property more like accurately.
the subject property
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149) How does the appraiser determine the Answer: a. Speedy and uncomplicated
adjusted value of the subject property in the application.
given illustration?
a. By multiplying the adjustments by the 153) What is the conclusion drawn about the
comparable sale price. application of the Direct Comparison Approach
b. By deducting the adjustments from the in the passage?
comparable sale price. a. It is a lengthy and complex process.
c. By adding the adjustments to the comparable b. It is only suitable for high-value properties.
sale price. c. It can be applied in a speedy and
d. By dividing the adjustments by the uncomplicated manner.
comparable sale price. d. It requires specialized training for appraisers.
Answer: c. By adding the adjustments to the Answer: c. It can be applied in a speedy and
comparable sale price. uncomplicated manner.
150) According to the passage, what is the total 154) According to the passage, what is the result
adjustment value in the given illustration? of adding the adjustments to the comparable
a. 5% sale price in the illustration?
b. 7% a. The value remains the same.
c. More than 10% b. The value is decreased.
d. Less than 5% c. The value is increased.
Answer: c. More than 10% d. The value is doubled.
Answer: c. The value is increased.
151) What is the adjusted value of the subject
property in the given illustration after applying 155) What does DCF stand for in the context of
the adjustments? valuation?
a. Rs. 7 Crore a. Discounted Cost Flow
b. Rs. 7.50 Crore b. Direct Capital Finance
c. Rs. 7.70 Crore c. Discounted Cash Flow
d. Rs. 8 Crore d. Dynamic Cash Funding
Answer: c. Rs. 7.70 Crore Answer: c. Discounted Cash Flow
152) According to the passage, what is the

advantage of using the Direct Comparison
Approach for the property valuation?
a. Speedy and uncomplicated application.
b. Comprehensive analysis of market trends.
c. Elimination of the need for adjustments.
d. In-depth examination of historical cost.
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156) What is the purpose of using the c. To select the alternative with the greatest
Discounted Cash Flow (DCF) approach? amount of discounted cash flows
a. To increase future cash flows d. To eliminate the need for cost of capital
b. To calculate the present value of potential Answer: c. To select the alternative with the
future cash flows greatest amount of discounted cash flows
c. To determine the cost of capital
d. To evaluate historical cash flows 160) In the DCF technique, what is the discount
Answer: b. To calculate the present value of rate based on?
potential future cash flows a. Future cash flows
b. Historical cash flows
157) What is the key factor used to determine c. Cost of capital
the discount rate in the DCF technique? d. Current market valuevz
a. Current market value Answer: c. Cost of capital
b. Company's cost of capital
c. Future cash flow 161) According to the passage, for what types of
d. Historical cash flow evaluations is the DCF approach helpful?
Answer: b. Company's cost of capital a. Calculating historical cash flows
b. Assessing current market value
158) Question 4. How is the total Present Value c. Determining the cost of capital
(PV) of all future cash flows calculated in the DCF d. Calculating the value of a prospective
technique? acquisition, investment in an annuity, or
a. Multiplying the discount rate by the historical purchase of a fixed asset
cash flow Answer: d. Calculating the value of a
b. Adding the future cash flows without applying prospective acquisition, investment in an
any discount annuity, or purchase of a fixed asset
c. Multiplying the discount rate by each future
cash flow 162) What does the DCF approach enable one to
d. Subtracting the cost of capital from the future compare when evaluating different investment
cash flows choices?
Answer: c. Multiplying the discount rate by a. Future cash flows
each future cash flow b. Historical cash flows
c. Present values of potential future cash flows
159) What is the primary purpose of performing d. Current market values
calculations of discounted cash flows for Answer: c. Present values of potential future
different investment choices? cash flows
a. To increase the discount rate
b. To determine the historical cash flow
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163) What is the fundamental tenet of a. Future cash flows

discounted cash flow analysis? b. Interest income
a. Future cash flows are more valuable than c. Present value
present cash flows. d. Delayed payment
b. Cash received in the future is more valuable Answer: b. Interest income
than cash received today.
c. Interest income is irrelevant in valuation. 168) According to the passage, what is a helpful
d. Delaying payment has no impact on cash flow. tool for assessing the value of the firm?
Answer: b. Cash received in the future is a. Future cash flows
more valuable than cash received today. b. Present Value (PV) by discounting future cash
flows
164) What is the term for paying someone for c. Interest income
the privilege of delaying a payment? d. Delayed payment
a. Interest income Answer: b. Present Value (PV) by
b. Future cash flow discounting future cash flows
c. Present value
d. Discounted cash flow 169) What does the method of arriving at the
Answer: a. Interest income Present Value (PV) of the firm involve?
a. Increasing future cash flows
165) In the example provided, what is the b. Delaying payment
interest rate used for the investment? c. Discounting future cash flows
a. 5% d. Ignoring interest income
b. 10% Answer: c. Discounting future cash flows
c. 15%
d. 20% 170) According to the passage, how can the
Answer: b. 10% discounted cash flow analysis be used to
evaluate similar firms?
166) What does the person lose if prevented a. By assessing future cash flows
from accessing the funds for one year in the b. By determining interest income
example? c. By comparing present values of potential
a. Rs. 1,00,000 future cash flows
b. Rs. 5,000 d. By delaying payment
c. Rs. 10,000 Answer: c. By comparing present values of
d. Rs. 20,000 potential future cash flows
Answer: c. Rs. 10,000
167) What is the value of money over time

demonstrated by in the provided illustration?
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171) What formula is used to calculate the 174) According to the passage, how is the value
Present Value (PV) of a firm in the discounted of the company typically segmented in the
cash flow (DCF) method? discounted cash flow methodology?
a. PV = Cash Flow / Discount Rate a. Into cash flow and discount rate.
b. PV = Cash Flow × Discount Rate b. Into present and future values.
c. PV = Cash Flow + Discount Rate c. Into two time periods.
d. PV = Cash Flow / (1 + Discount Rate)^t d. Into definite and indefinite life.
Answer: d. PV = Cash Flow / (1 + Discount Answer: c. Into two time periods.
Rate)^t
175) In the formula PV = Cash Flow / (1 +
172) How does the valuation method for a Discount Rate)^t, what does 't' represent?
capital project differ from that of a company a. Time period
using the discounted cash flow methodology? b. Total value
a. Capital projects have indefinite life, while c. Tax rate
companies have a definite life. d. Terminal value
b. Capital projects assume expansion during Answer: a. Time period
their life-cycle, while companies are presumed
not to expand. 176) What is the main difference in making cash
c. Companies have definite life, while capital flow projections between a capital project and a
projects have indefinite life. company in the discounted cash flow
d. Both have the same methodology. methodology?
Answer: b. Capital projects assume a. Capital projects require indefinite projections,
expansion during their life-cycle, while while companies have definite projections.
companies are presumed not to expand. b. Companies require indefinite projections,
while capital projects have definite projections.
173) What is the challenging aspect of valuing a c. Both require definite projections.
business entity using the discounted cash flow d. Both require indefinite projections.
methodology? Answer: b. Companies require indefinite
a. Making cash flow projections for a definite projections, while capital projects have definite
period. projections.
b. Presuming a definite life for the business.
c. Anticipating future expansion of the business.
d. Assuming the business will not expand.
Answer: c. Anticipating future expansion of
the business.
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177) According to the passage, what is the d. To accelerate the valuation process.
commonality between the DCF method for Answer: c. Anticipation of significant change
valuing a firm and evaluating a capital project? within the company.
a. Both presume indefinite expansion.
b. Both require definite projections. 180) According to the passage, what is the
c. Both involve making cash flow projections. presumed state of the company at the end of
d. Both have the same time segmentation. the explicit prediction period?
Answer: c. Both involve making cash flow a. Bankruptcy.
projections. b. Liquidation.
c. Stable level.
d. Unpredictable growth.
178) What is the formula for the value of the Answer: c. Stable level.
firm in the discounted cash flow (DCF)
approach? 181) What is the explicit forecast period typically
a. Present value of cash flow during the explicit between in the discounted cash flow approach?
forecast period - Present value of cash after the a. 1 and 5 years.
explicit forecast period. b. 5 and 10 years.
b. Present value of cash flow during the explicit c. 10 and 15 years.
forecast period + Present value of cash after the d. 5 and 15 years.
explicit forecast period. Answer: d. 5 and 15 years.
c. Present value of cash flow during the explicit
forecast period × Present value of cash after the 182) What is the method used to calculate the
explicit forecast period. ongoing value of the company after the explicit
d. Present value of cash flow during the explicit prediction period?
forecast period / Present value of cash after the a. Complex forecasting.
explicit forecast period. b. Advanced modeling.
Answer: b. Present value of cash flow during c. More straightforward method.
the explicit forecast period + Present value of d. Extrapolation of historical data.
cash after the explicit forecast period. Answer: c. More straightforward method.
179) Question 25. In the DCF approach, why is a

significant amount of effort put into forecasting
yearly cash flow during the explicit forecast
period?
a. To minimize forecasting errors.
b. Due to regulatory requirements.
c. Anticipation of significant change within the
company.
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183) In the steps involved in the valuation using 187) What is the focus of Step 3 in the DCF
the DCF approach, what is analyzed in Step 1 to approach?
calculate the historical performance of the a. Calculate Free Cash Flow.
company? b. Analyze historical performance.
a. Operating Invested Capital. c. Determine the terminal value.
b. Net operating profit less adjusted taxes. d. Calculate the Weighted Average Cost of
c. Return on Invested Capital. Capital (WACC).
d. Net Investments. Answer: d. Calculate the Weighted Average
Answer: a. Operating Invested Capital. Cost of Capital (WACC).
184) What does DCF stand for in the discounted 188) In Step 4, what is the basis for forecasting
cash flow approach? future cash flows during the explicit forecast
a. Dynamic Capital Funding. period?
b. Direct Cash Forecasting. a. Weighted Average Cost of Capital (WACC).
c. Discounted Cash Flow. b. Historical performance.
d. Definitive Capital Valuation. c. Free Cash Flow calculations.
Answer: c. Discounted Cash Flow. d. Terminal value calculations.
Answer: c. Free Cash Flow calculations.
185) According to the passage, what is
presumed about the company's state at the end 189) What is calculated in Step 4 to determine
of the explicit prediction period? the present value (PV) of free cash flows?
a. It will be in a state of crisis. a. Weighted Average Cost of Capital (WACC).
b. It will have reached a "stable level." b. Terminal value.
c. It will continue significant change. c. Future cash flows.
d. It will have unpredictable growth. d. Non-operating assets.
Answer: b. It will have reached a "stable Answer: a. Weighted Average Cost of Capital
level." (WACC).
186) What is the purpose of Step 2 in the 190) What is the focus of Step 5 in the DCF
valuation process using the discounted cash flow approach?
(DCF) approach? a. Calculate Free Cash Flow.
a. Calculate Weighted Average Cost of Capital b. Analyze historical performance.
(WACC). c. Determine the present value (PV) of free cash
b. Analyze historical performance. flows.
c. Determine the terminal value. d. Find the terminal value after the explicit
d. Calculate Free Cash Flow. forecast period and find its PV.
Answer: d. Calculate Free Cash Flow. Answer: d. Find the terminal value after the
explicit forecast period and find its PV.
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191) In Step 6, what is added to arrive at the

valuation of the firm?
a. Weighted Average Cost of Capital (WACC).
b. Terminal value.
c. Non-operating assets.
d. Historical performance.
Answer: c. Non-operating assets.
192) What is the terminal value used for in the

DCF approach?
a. To calculate Free Cash Flow.
b. To analyze historical performance.
c. To determine the present value (PV) of free
cash flows.
d. To estimate the firm's value beyond the
explicit forecast period.
Answer: d. To estimate the firm's value
beyond the explicit forecast period.
193) According to the passage, what is the final

step in the valuation process using the DCF
approach?
a. Calculate Free Cash Flow.
b. Analyze historical performance.
c. Determine the present value (PV) of free cash
flows.
d. Add values in Step 4 and 5 plus the value of
non-operating assets to arrive at the valuation of
the firm.
Answer: d. Add values in Step 4 and 5 plus
the value of non-operating assets to arrive at the
valuation of the firm.
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CHAPTER 14:- Discounted Cash Flow Valuation

1. What is the fundamental assumption of b. Two-Stage Model.
the Dividend Discount Model (DDM)? c. Constant and stable growth.
a. The fair price of a share is based on the d. Three-Stage Model.
company's historical dividends.
b. The fair price of a share equals the Answer: c. Constant and stable growth.
present value of the company's future
dividends. 4. Which model is mentioned for dividend
c. The fair price of a share is determined by valuation where there is no growth in
the current market conditions. dividends?
d. The fair price of a share is unrelated to a. Constant Growth Model.
the company's dividends. b. Zero Growth Model.
c. Two-Stage Model.
Answer: b. The fair price of a share d. H Model.
equals the present value of the company's
future dividends. Answer: b. Zero Growth Model.
2. What is a characteristic of Dividend 5. What is the primary principle behind

Discount Models (DDMs) mentioned in the Dividend Discount Models (DDMs)?
passage? a. Focusing on market conditions.
a. They are the newest discounted cash b. Estimating the value of non-operating
flow models. assets.
b. They are no longer used in practice. c. Evaluating future cash flows.
c. They produce estimates of value that are d. Valuing a company based on future
too aggressive. dividends.
d. They are among the oldest discounted
cash flow models still used today. Answer: d. Valuing a company based on
future dividends.
Answer: d. They are among the oldest
discounted cash flow models still used 6. How many stages are considered in the
today. Two-Stage Model for dividend valuation?
a. One.
3. What does the Constant Growth Model, b. Two.
also known as the Gordon Growth Model, c. Three.
focus on in the context of dividends? d. Four.
a. Zero Growth.
Answer: b. Two.
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7. What is the Constant Growth Model based on Answer: c. Rate of return required by the
in dividend discount models (DDMs)? investor.
a. Assumption of decreasing dividends over
time. 11. According to the Constant Growth Model,
b. Fixed growth rate (g) in dividends. what does "n" represent in the formula?
c. Variable growth rate in dividends. a. Any number between 0 and infinity.
d. Inverse relationship with the rate of return. b. Fixed growth rate (g) in dividends.
c. Expected dividend one year from now.
Answer: b. Fixed growth rate (g) in dividends. d. Rate of return required by the investor.
8. In the Constant Growth Model formula, what Answer: a. Any number between 0 and
does "𝐏𝟎" represent? infinity.
a. Expected dividend one year from now.
b. Current fair price of the share or intrinsic 12. What mathematical concept is used in the
value of the share. Constant Growth Model formula to simplify the
c. Rate of return required by the investor. expression?
d. The sum of a geometric progression. a. Linear regression.
b. Exponential growth.
Answer: b. Current fair price of the share or c. Sum of a geometric progression.
intrinsic value of the share. d. Quadratic equation.
9. What does "D₁" represent in the Constant Answer: c. Sum of a geometric progression.
Growth Model formula?
a. The sum of a geometric progression. 13. In the simplified Constant Growth Model
b. Expected dividend one year from now. expression, what is raised to the power of "(𝐫 −
c. Rate of return required by the investor. 𝐠)ⁿ"?
d. Current fair price of the share or intrinsic a. Expected dividend one year from now.
value of the share. b. Fixed growth rate (g) in dividends.
c. Rate of return required by the investor.
Answer: b. Expected dividend one year from d. Current fair price of the share or intrinsic
now. value of the share.
10. What does "r" represent in the Constant Answer: b. Fixed growth rate (g) in dividends.
Growth Model formula?
a. Expected dividend one year from now.
b. The sum of a geometric progression.
c. Rate of return required by the investor.
d. Fixed growth rate (g) in dividends.
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14. How is the expression for the Constant b. Rs. 0.07

Growth Model simplified using the sum of a c. Rs. 0.12
geometric progression? d. Rs. 3
a. By integrating the formula. Answer: a. Rs. 42.86
b. By finding the derivative.
c. By factoring the terms. 19. What assumption is made in the Zero
d. By using the formula for the sum of a Growth Model for dividend valuation?
geometric progression. a. Dividends will decrease over time.
Answer: d. By using the formula for the sum b. Dividend per share will stay the same from
of a geometric progression. year to year.
c. Dividends will fluctuate.
15. What is the expected dividend per share d. Dividends will increase at a constant rate.
(D₁) for XYZ Ltd. in the example? Answer: b. Dividend per share will stay the
a. Rs. 0.12 same from year to year.
b. Rs. 0.05
c. Rs. 3 20. What is the formula for the fair price of a
d. Rs. 42.86 share in the Zero Growth Model?
Answer: c. Rs. 3 a. 𝐏𝟎 = 𝐃 / 𝐠
b. 𝐏𝟎 = 𝐃 / 𝐫
16. What is the expected growth rate in c. 𝐏𝟎 = 𝐫 / 𝐃
dividends (g) for XYZ Ltd. in the example? d. 𝐏𝟎 = 𝐃 / (𝐫 - 𝐠)
a. 5% Answer: b. 𝐏𝟎 = 𝐃 / 𝐫
b. 12%
c. 0.07
d. Rs. 42.86 21. Which model assumes that dividends will
Answer: a. 5% remain constant over time?
a. Constant Growth Model
17. What is the rate of return required by the b. Two-Stage Model
investor (r) in the example? c. Zero Growth Model
a. Rs. 3 d. Three-Stage Model
b. Rs. 42.86 Answer: c. Zero Growth Model
c. 12%
d. 0.05
Answer: c. 12%
18. Growth Model formula, what is the fair

price of XYZ Ltd.'s share (𝐏𝟎)?
a. Rs. 42.86
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22. What is the expected dividend per share b. Dividend per share will stay the same
(D₁) for XYZ Ltd. in the illustration? from year to year.
a. Rs. 0.12 c. Exceptional growth will last for a set
b. Rs. 3 number of years.
c. Rs. 0.00 d. Dividends will increase at a constant
d. Rs. 12 rate.
Answer: b. Rs. 3 Answer: c. Exceptional growth will last

for a set number of years.
23. What is the expected growth rate in
dividends (g) for XYZ Ltd. in the 27. How does the Two-Stage Model modify
illustration? the continuous growth model?
a. 0% a. Assumes constant growth indefinitely.
b. 12% b. Assumes no growth.
c. 3 c. Assumes exceptional growth for a set
d. Rs. 25 number of years.
Answer: a. 0% d. Assumes fluctuating growth.
Answer: c. Assumes exceptional growth
24. What is the rate of return required by for a set number of years.
the investor (r) in the illustration?
a. Rs. 3 28. What is the formula for the fair price of
b. Rs. 0.12 a share in the Two-Stage Model?
c. 12% a. 𝐏𝟎 = 𝐃 / 𝐠
d. Rs. 25 b. 𝐏𝟎 = 𝐃 / 𝐫
Answer: c. 12% c. 𝐏𝟎 = 𝐫 / 𝐃
d. 𝐏𝟎 = 𝐃 / (𝐫 - 𝐠)
25. According to the Zero Growth Model Answer: d. 𝐏𝟎 = 𝐃 / (𝐫 - 𝐠)
formula, what is the fair price of XYZ Ltd.'s
share (𝐏𝟎)? 29. What is the fair price of XYZ Ltd.'s share
a. Rs. 42.86 in the Two-Stage Model if the dividend is
b. Rs. 0.00 Rs. 3, the growth rate is 0%, and the rate of
c. Rs. 25 return required by the investor is 12%?
d. Rs. 3 a. Rs. 42.86
Answer: c. Rs. 25 b. Rs. 0.00
c. Rs. 25
26. What assumption is made in the Two- d. Rs. 3
Stage Model for dividend valuation? Answer: c. Rs. 25
a. Dividends will decrease over time.
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30. What does 𝐏𝟎 represent in the formula d. It determines the present value of the
for the market price of the equity share? equity share.
a. Present value of the equity share Answer: b. It is assumed that the share
b. Expected price of the equity share will be sold at the end of year n.
c. Current market price of the equity share
d. Growth rate of the equity share 34. In the two-stage growth model, what
does 𝐏𝐧 represent?
Answer: c. Current market price of the a. Present value of the equity share at the
equity share end of year n
b. Expected price of the equity share at the
31. What does 𝐃𝟏 represent in the end of year n
formula for the market price of the equity c. Present value of the dividend at the end
share? of year n
a. Present value of the dividend d. Current market price of the equity share
b. Expected dividend one year from now Answer: a. Present value of the equity
c. Growth rate of the dividend share at the end of year n
d. Dividend at the end of year n
Answer: b. Expected dividend one year 35. What is the formula for 𝐏𝐧 in the two-stage
from now growth model?
a. 𝐏𝐧 = 𝐃𝐧 / (𝐫 − 𝐠)
32. What does g₁ represent in the formula b. 𝐏𝐧 = 𝐃𝐧 / (𝐫 + 𝐠)
for the market price of the equity share? c. 𝐏𝐧 = 𝐃𝐧 / (𝐫 − 𝐠𝟐)
a. Rate of return required by the investor d. 𝐏𝐧 = 𝐃𝐧 / (𝐫 + 𝐠𝟐)
b. Extraordinary growth rate valid for n Answer: c. 𝐏𝐧 = 𝐃𝐧 / (𝐫 − 𝐠𝟐)
years
c. Growth rate of the equity share 36. How is 𝐃𝐧+𝟏 expressed in terms of the
d. Price of the equity share at the end of dividend in the first stage?
year n a. 𝐃𝐧+𝟏 = 𝐃𝟏 / (𝟏 + 𝐠𝟏)
Answer: b. Extraordinary growth rate b. 𝐃𝐧+𝟏 = 𝐃𝟏 / (𝟏 + 𝐠𝟐)
valid for n years c. 𝐃𝐧+𝟏 = 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 + 𝐠𝟐)
d. 𝐃𝐧+𝟏 = 𝐃𝟏(𝟏 + 𝐠𝟐) / (𝟏 + 𝐠𝟏)
33. Why is the price of the equity share at Answer: c. 𝐃𝐧+𝟏 = 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 +
the end of year n (P) included in the 𝐠𝟐)
formula?
a. It represents the rate of return.
b. It is assumed that the share will be sold
at the end of year n.
c. It is the expected dividend.
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37. What is the formula for 𝐏𝟎 in the two- Answer: c. 25%

stage growth model?
a. 𝐏𝟎 = 𝐃𝟏(𝟏 − (𝟏 + 𝐠𝟏) / (𝟏 + 𝐫)𝐧(𝐫 − 𝐠𝟏)) 41. What is the growth rate (𝐠𝟐) expected
+ 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 + 𝐠𝟐)(𝟏 / (𝟏 + 𝐫)𝐧) after the initial 6 years in the illustration?
b. 𝐏𝟎 = 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 + 𝐫)𝐧(𝐫 − 𝐠𝟏) + a. 5%
𝐃𝟏(𝟏 / (𝟏 + 𝐫)𝐧) b. 15%
c. 𝐏𝟎 = 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 + 𝐫)𝐧(𝐫 − 𝐠𝟐) + c. 25%
𝐃𝟏(𝟏 / (𝟏 + 𝐫)𝐧) d. 35%
d. 𝐏𝟎 = 𝐃𝟏(𝟏 − (𝟏 + 𝐠𝟏) / (𝟏 + 𝐫)𝐧(𝐫 − 𝐠𝟐)) Answer: b. 15%
+ 𝐃𝟏(𝟏 / (𝟏 + 𝐫)𝐧)
Answer: a. 𝐏𝟎 = 𝐃𝟏(𝟏 − (𝟏 + 𝐠𝟏) / (𝟏 + 42. How many years is the extraordinary
𝐫)𝐧(𝐫 − 𝐠𝟏)) + 𝐃𝟏(𝟏 + 𝐠𝟏) / (𝟏 + 𝐠𝟐)(𝟏 / (𝟏 growth rate (g₁) expected to last in the
+ 𝐫)𝐧) illustration?
a. 2 years
38. In the illustration, what is the expected b. 4 years
growth rate for PML Private Limited in the c. 6 years
first stage? d. 8 years
a. 5% Answer: c. 6 years
b. 15%
c. 25% 43. What is the required rate of return (r)
d. 35% for equity investors in the illustration?
Answer: c. 25% a. 10%
b. 15%
39. How many years is the above-normal c. 20%
growth rate expected to last for PML d. 25%
Private Limited in the illustration? Answer: c. 20%
a. 2 years
b. 4 years 44. What is the expected dividend (𝐃𝟏)
c. 6 years one year from now in the illustration?
d. 8 years a. Rs. 4.75
Answer: c. 6 years b. Rs. 5.00
c. Rs. 5.25
40. What is the growth rate (g₁) expected d. Rs. 5.50
for the first 6 years in the illustration? Answer: c. Rs. 6.25
a. 5%
b. 15%
c. 25%
d. 35%
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45. What is the H model's main distinction B. 2H years

from the traditional two-stage growth C. H/2 years
model? D. 2/H years
Answer: B. 2H years
A. It assumes constant growth throughout
both stages. 49. What does the equation for the H
B. It postulates a linear decrease in growth model of valuation calculate?
rate over time.
C. It features an exponential increase in A. Current dividend per share
growth rate. B. Intrinsic value of each share
D. It maintains a stable growth rate in the C. Rate of return needed by investors
beginning stage. D. Steady growth rate
Answer: B. It postulates a linear Answer: B. Intrinsic value of each share
decrease in growth rate over time.
50. When does the earnings growth rate
46. Who developed the H model of become stable in the H model?
valuation?
A. At the beginning stage
A. Fisher and Black-Scholes B. Linearly over time
B. Fuller and Hsia C. After achieving stability
C. Modigliani and Miller D. In the steady stage
D. Sharpe and Lintner Answer: D. In the steady stage
Answer: B. Fuller and Hsia
51. Which factor does the H model assume
47. What does the parameter "𝐠𝐚" to remain stable forever after achieving
represent in the H model? stability?
A. Steady growth rate A. Rate of return needed by investors

B. Initial growth rate B. Current dividend per share
C. Rate of return needed by investors C. Earnings growth rate
D. Stability achieved growth rate D. Steady growth rate
Answer: B. Initial growth rate Answer: C. Earnings growth rate
48. How long does it take for the earnings

growth rate to decrease linearly to the
stable growth rate in the H model?
A. H years
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52. In the equation 𝐏𝟎 = 𝐃𝟎[(𝟏 + 𝐠𝐧) + 𝐇 A. Current growth rate

(𝐠𝐚 − 𝐠𝐧)] / (𝐫 − 𝐠𝐧), what does "r" B. Expected long-term growth rate
represent? C. Abnormal growth rate
D. Normal growth rate
A. Intrinsic value of each share Answer: B. Expected long-term growth
B. Rate of return needed by investors rate
C. Current dividend per share
D. Initial growth rate 56. What is the significance of "𝐠𝐚" in the
Answer: B. Rate of return needed by modified H model equation?
investors
A. Normal growth rate
53. What is the primary purpose of the B. Current growth rate
modified H model equation? C. Abnormal growth rate
D. Duration of abnormal growth
A. Calculating current dividend per share Answer: B. Current growth rate
B. Estimating expected long-term growth
rate 57. What does the term "H" represent in
C. Valuing shares based on abnormal the modified H model equation?
growth
D. Determining the duration of normal A. Half of the duration during which
growth abnormal growth levels out
Answer: C. Valuing shares based on B. Duration of normal growth
abnormal growth C. Total duration of growth
D. Half of the duration during which
54. In the context of the modified H model, normal growth levels out
what does "r" represent in the equation? Answer: A. Half of the duration during
which abnormal growth levels out
A. Abnormal growth rate
B. Expected long-term growth rate 58. Which part of the equation accounts
C. Rate of return needed by investors for the value based on the normal growth
D. Current growth rate rate?
Answer: C. Rate of return needed by
investors A. 𝐃𝟎𝐇(𝐠𝒂 − 𝐠𝒏)/(𝐫 − 𝐠𝐧)
B. 𝐃𝟎(𝟏+𝐠𝒏)/(𝐫−𝐠𝐧)
C. 𝐃𝟎(𝟏+𝐠𝒏)
55. In the equation 𝑷𝟎 = 𝐃𝟎(𝟏+𝐠𝒏)/(𝐫−𝐠𝐧) D. 𝐃𝟎𝐇(𝐠𝒂 − 𝐠𝒏)
+ 𝐃𝟎𝐇(𝐠𝒂−𝐠𝒏)/(𝐫−𝐠𝐧), what does 𝐠𝐧 Answer: B. 𝐃𝟎(𝟏+𝐠𝒏)/(𝐫−𝐠𝐧)
represent?
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59. What is the dividend payment per 63. What is the calculated intrinsic value
share (𝐃𝟎) in the given illustration? per share using the H model in the
illustration?
A. Rs. 10
B. Rs. 5 A. Rs. 30
C. Rs. 1 B. Rs. 42
D. Rs. 15 C. Rs. 15
Answer: C. Rs. 1 D. Rs. 10
Answer: B. Rs. 42
60. What is the initial growth rate (𝐠𝐚) in
the illustration? 64. According to the H model, how does
the growth rate change over time?
A. 10%
B. 15% A. It suddenly slows down after a given
C. 30% amount of time.
D. 5% B. It remains constant throughout.
Answer: C. 30% C. It gradually slows down over time.
D. It increases exponentially.
61. How many years does it take for the Answer: C. It gradually slows down over
growth rate to linearly decrease to the time.
stable growth rate in the illustration (H)?
65. Why is the H model considered more
A. 2 years realistic than the two-stage model?
B. 5 years
C. 10 years A. It predicts a sudden increase in growth
D. 15 years rate.
Answer: B. 5 years B. It predicts a sudden decrease in growth
rate.
62. What is the rate of return needed by C. It predicts a sudden slowdown in growth
investors (𝑟) in the illustration? rate.
D. It predicts a constant growth rate.
A. 5% Answer: C. It predicts a gradual
B. 10% slowdown in growth rate.
C. 15% –
D. 20%
Answer: C. 15%
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66. What is the significance of discounted a) Market value.

cash flow (DCF) valuation in the context of b) Book value.
other valuation techniques? c) Present value.
d) Future value.
a) DCF valuation is the only method used in
practice. Answer: c) Present value.
b) DCF valuation serves as the basis for all
other valuation techniques.
c) DCF valuation is irrelevant in real-world 70. why is understanding discounted cash
scenarios. flow analysis important?
d) DCF valuation is an alternative to
relative valuations. a) It is the only valuation method used in
the real world.
Answer: b) It serves as the basis for all other
67. b) DCF valuation serves as the basis for valuation techniques.
all other valuation techniques. c) It is quicker to apply than other
methods.
d) It is unrelated to asset appraisal.
68. Why is it common practice to start with
a discounted cash flow (DCF) valuation Answer: b) It serves as the basis for all
before applying option pricing models? other valuation techniques.
a) Option pricing models are less accurate

than DCF. 71. What does the concept of present
b) DCF provides a foundation for asset value state regarding the value of any
appraisal. asset?
c) Option pricing models are irrelevant in
valuation. a) The value is based on historical cash
d) DCF is quicker to apply than option flows.
pricing models. b) The value is equal to the sum of
predicted future cash flows.
Answer: b) DCF provides a foundation c) The value is unrelated to cash flows.
for asset appraisal. d) The value is determined by market
trends.
69. What concept is the discounted cash Answer: b) The value is equal to the
flow (DCF) analysis grounded in? sum of predicted future cash flows.
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72. What determines how the discount d) The historical performance of a

rate is calculated in discounted cash flow company.
(DCF) valuation?
Answer: c) The intrinsic value of an
a) The company's market capitalization. asset.
b) The level of risk associated with
expected cash flows. 75. How can "intrinsic value" be defined in
c) The company's industry sector. the context of discounted cash flow (DCF)
d) The historical performance of the valuation?
company.
a) The market value of a company.
Answer: b) The level of risk associated b) The face value of bonds.
with expected cash flows. c) The value evaluated by a neutral analyst
based on accurate estimates of expected
cash flows and appropriate discount rates.
73. How are discount rates applied in d) The historical performance of a
discounted cash flow (DCF) valuation company.
concerning the risk associated with assets?
Answer: c) The value evaluated by a
a) Higher rates are applied to safer neutral analyst based on accurate
projects. estimates of expected cash flows and
b) Rates are not influenced by the level of appropriate discount rates.
risk.
c) Higher rates are applied to riskier assets. 76. How is the cost of equity calculated
d) Rates are the same for all types of based on the anticipated return?
assets.
a) By subtracting the risk-free rate from
Answer: c) Higher rates are applied to the default risk.
riskier assets. b) By multiplying the risk-free rate by the
diversifiable risk.
c) By adding a fixed premium to the risk-
74. What does the discounted cash flow free rate.
(DCF) valuation method aim to estimate? d) By calculating the average risk across all
investors.
a) The market value of an asset.
b) The face value of bonds. Answer: c) By adding a fixed premium
c) The intrinsic value of an asset. to the risk-free rate.
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77. According to the passage, what should Answer: d) The risk profiles of the cash
be used to determine the weights applied flows being valued.
when evaluating an existing corporation?
a) Book value weights. 80. What should be included in the cost of

b) Historical market values. debt to account for the risk of the debt
c) Current market values of the company's going into default?
debt and equity.
d) Average values over the past five years. a) Default premium.
b) Historical market values.
Answer: c) Current market values of the c) Book value weights.
company's debt and equity. d) Risk-free rate.
78. What fundamental concept of Answer: a) Default premium.

valuation does the passage emphasize
when determining weights?
81. What is the challenge highlighted in the
a) The concept of historical market values. passage regarding estimating future
b) The concept of book value weights. growth?
c) The concept of indifference between
purchasing and selling an asset at fair a) Identifying the average values of growth
value. over the past five years.
d) The concept of average values. b) Determining the market values of debt
and equity.
Answer: c) The concept of indifference c) Quantifying the risk of defaulting on a
between purchasing and selling an asset at loan or losing money on an investment.
fair value. d) Applying book value weights to growth
estimates.
79. What should discount rates in
discounted cash flow valuations be Answer: c) Quantifying the risk of
reflective of? defaulting on a loan or losing money on an
investment.
a) Historical performance.
b) Book value weights.
c) Current market values.
d) The risk profiles of the cash flows being
valued.
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82. What is the hope regarding the Answer: c) They assert that their
relationship between market prices and an valuation models are superior to, or more
asset's intrinsic value in discounted cash complex than, those utilized by their
flow (DCF) valuation? contemporaries in the industry.
a) They will always be the same. 85. What is one of the required inputs for
b) They will never align. applying the discounted cash flow (DCF)
c) They will eventually align. method?
d) They are irrelevant to the valuation
process. a) The company's market capitalization.
b) The estimated pattern of growth.
Answer: c) They will eventually align. c) The number of employees in the firm.
d) The historical performance of the
83. What is a characteristic of discounted company.
cash flow (DCF) models ?
Answer: b) The estimated pattern of
a) There is only one standard DCF model. growth.
b) There are limited variations in DCF
models. 86. What type of financial models are
c) There are no variations in DCF models. referred to as dividend discount models?
d) There are many different variations of
DCF models. a) Models that use any form of cash flows.
b) Models that use dividends as cash flows.
Answer: d) There are many different c) Models that use interest payments as
variations of DCF models. cash flows.
d) Models that use reinvested cash flows.
84. What is a common practice among
investment banks and consulting firms Answer: b) Models that use dividends as
regarding their valuation models? cash flows.
a) They rarely use valuation models.

b) They assert that their models are always
inferior.
c) They claim superiority or complexity
over models used by others.
d) They share their models openly with
competitors.
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87. How can a broader definition of cash d) By excluding preferred dividends from
flows to equity be described? the calculation.
a) Cash flows to equity include only Answer: b) By adding free cash flows to
dividends. equity to cash flows to lenders (debt) and
b) Cash flows to equity are the same as preferred stockholders.
cash flows to debt holders.
c) Cash flows to equity are what is left after 90. What is the cash flow referred to as
meeting the claims of non-equity investors when estimating cash flows by taking
and sustaining projected growth. after-tax operating income and subtracting
d) Cash flows to equity are irrelevant in the net investment required to maintain
financial modeling. growth?
Answer: c) Cash flows to equity are a) Dividend cash flow.

what is left after meeting the claims of b) Free cash flow to equity (FCFE).
non-equity investors and sustaining c) Free cash flow to the firm (FCFF).
projected growth. d) Operating income cash flow.
88. What is the total cash flow to all claim Answer: c) Free cash flow to the firm
holders in the company referred to as? (FCFF).
a) Dividend discount. 91. What do models that make use of

b) Free cash flow to equity (FCFE). after-tax operating income and net
c) Cash flow to lenders. investment to estimate cash flows to the
d) Cash flow to the firm. firm (FCFF) are referred to as?
Answer: d) Cash flow to the firm. a) DCF models.

b) FCFE models.
89. How is the cash flow to the firm c) FCFF models.
calculated ? d) Dividend models.
a) By subtracting free cash flows to equity Answer: c) FCFF models.

from total cash flows.
b) By adding free cash flows to equity to
cash flows to lenders and preferred
stockholders.
c) By multiplying dividends by the growth
rate.
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92. How is the question "how much money c) To calculate the cost of capital.
would have to be invested presently, at a d) To find the present value of future cash
particular rate of return, to yield the flows, considering the risk and timing.
anticipated cash flow, at its future date"
Answered in valuation? Answer: d) To find the present value of
future cash flows, considering the risk and
a) By multiplying future cash flows by the timing.
discount rate.
b) Through the process of compounding. 95. What principle guides the
c) By using a rate that reflects the cost of determination of discount rates in
capital, known as the discount rate. valuation, especially concerning cash flows
d) By subtracting the anticipated cash flow with varying levels of risk?
from the present investment.
a) The cost of capital.
Answer: c) By using a rate that reflects b) The level of anticipated growth.
the cost of capital, known as the discount c) The principle of compounding.
rate. d) Higher-risk cash flows should have
higher discount rates.
93. What is the primary consideration
when determining the discount rate in Answer: d) Higher-risk cash flows
valuation? should have higher discount rates.
a) The historical performance of the

company. 96. What is the first type of risk mentioned
b) The cost of capital. in the passage, and what does it refer to?
c) The level of risk associated with the cash
flows. a) Market risk - the risk associated with
d) The anticipated growth rate. fluctuations in the stock market.
b) Operational risk - the risk of disruptions
Answer: c) The level of risk associated in business operations.
with the cash flows. c) Default risk - the possibility of breaking
financial promises.
d) Interest rate risk - the risk of interest
94. What is the purpose of discounting rate fluctuations.
future cash flows in valuation?
Answer: c) Default risk - the possibility
a) To increase the future cash flows. of breaking financial promises.
b) To determine the future cash flows.
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97. What is the term used for the rate that Answer: c) The higher the deviation
reflects the possibility of default when between actual and expected returns, the
looking at debt? higher the level of risk.
a) Cost of equity. 100. A how should the risk in an

b) Cost of debt. investment be perceived?
c) Cost of capital.
d) Default rate. a) Through the perspective of the average
investor.
Answer: b) Cost of debt. b) Through the perspective of the most
risk-averse investor.
98. Why might the cost of debt for most c) Through the perspective of the marginal
companies be lower after taxes are taken investor with good diversification.
into account? d) Through the perspective of the investor
with the highest risk tolerance.
a) Interest expenses are not deductible.
b) Interest expenses are deductible from Answer: c) Through the perspective of
taxable income. the marginal investor with good
c) The cost of debt is not affected by taxes. diversification.
d) Taxation has no impact on the cost of
debt. 101. What type of risk is emphasized when
estimating discount rates for an
Answer: b) Interest expenses are investment?
deductible from taxable income.
a) Diversifiable risk.
99. How is risk related to the difference b) Market risk.
between actual returns and expected c) Default risk.
returns in the context of equity? d) Interest rate risk.
a) Risk is unrelated to returns. Answer: b) Market risk.

b) Risk is determined solely by default risk.
c) The higher the deviation between actual
and expected returns, the higher the level
of risk.
d) Actual and expected returns are always
the same, so risk is not a factor.
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CHAPTER 15:- Other Non-DCF valuation models

1. What are the two major groups into which 4. Which are the most common valuation
different value multiples are organized for multiples mentioned for enterprises ?
valuation?
a) P/E ratio, P/B ratio, and P/S ratio.
a) Historical multiples and projected b) EV-EBITDA ratio, EV-book value ratio, and
multiples. EV-sales ratio.
b) Stock valuation multiples and bond c) Historical multiples, projected multiples,
valuation multiples. and industry multiples.
c) Market multiples and industry multiples. d) Bond valuation multiples, market
d) Stock valuation multiples and enterprise multiples, and stock valuation multiples.
valuation multiples.
Answer: b) EV-EBITDA ratio, EV-book value
Answer: d) Stock valuation multiples and ratio, and EV-sales ratio.
enterprise valuation multiples.
5. ation multiples calculated for each of the
2. Which of the following is NOT a stock similar companies?
valuation multiple?
a) By using a fixed formula for all companies.
a) Price-Earnings ratio (P/E ratio). b) By using the book value of assets only.
b) Price-Book Value ratio (P/B ratio). c) By employing the observed financial
c) Enterprise Value to Earnings Before characteristics and values of the companies
Interest and Taxes (EV-EBIT). being compared.
d) Price-Sales ratio (P/S ratio). d) By relying on historical data of the
companies.
Answer: c) Enterprise Value to Earnings
Before Interest and Taxes (EV-EBIT). Answer: c) By employing the observed
financial characteristics and values of the
3. What does EBITDA stand for? companies being compared.
a) Earnings Before Interest, Taxes, Dividends

& Assets.
b) Earnings Before Interest, Taxes,
Depreciation & Amortization.
c) Enterprise Before Income, Tax,
Depreciation & Assets.
d) Earnings Before Interest, Taxes, Dividends
& Amortization.
Answer: b) Earnings Before Interest, Taxes,
Depreciation & Amortization.
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6. What does EV-EBITDA represent in the c) It is possible by applying the average

context of valuation multiples? multiples of comparable companies.
d) It requires historical financial data.
a) Enterprise Value to Book Value.
b) Enterprise Value to Earnings Before Answer: c) It is possible by applying the
Interest, Taxes, Depreciation & Amortization. average multiples of comparable companies.
c) Enterprise Value to Sales.
d) Earnings Before Interest, Taxes, 10. What are the most important drivers of
Depreciation & Amortization to Book Value. valuation multiples?
Answer: b) Enterprise Value to Earnings a) Historical performance and industry

Before Interest, Taxes, Depreciation & trends.
Amortization b) Growth prospects, risk characteristics, and
size.
7. what is the calculated value for EV/Sales? c) The number of employees and market
capitalization.
A) 0.50 d) Book value and dividends.
B) 0.62
C) 0.72 Answer: b) Growth prospects, risk
D) 0.85 characteristics, and size.
Answer: C) 0.72 11. What does the passage suggest about

the judgmental view of multiples for the
8. In the provided example, what is the subject company?
average EV-BOOK value for Companies A and
B? a) It is unnecessary in valuation.
b) It should be based solely on historical
a) 0.5 data.
b) 0.75 c) It should consider the subject company's
c) 2.625 growth prospects, risk characteristics, and
d) 3 size in comparison to comparable
companies.
Answer: b) 0.75 d) It is irrelevant to the valuation process.
9. What does the passage suggest about Answer: c) It should consider the subject
obtaining multiple estimates of the company's growth prospects, risk
enterprise value for the subject company? characteristics, and size in comparison to
comparable companies.
a) It is unnecessary.
b) It can be done using only one valuation
multiple.
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12. What is the EBITDA for company M? b) The ratio of enterprise value to Book
Value of Assets.
a) Rs. 500 crore. c) The ratio of enterprise value to Sales.
b) Rs. 5500 crore. d) The ratio of Book Value of Assets to Sales.
c) Rs. 2000 crore.
d) Rs. 400 crore. Answer: b) The ratio of enterprise value to
Book Value of Assets.
Answer: a) Rs. 500 crore.
16. What is the average EV-Sales for the
13. What is described as a more comparable companies (E, F, G)?
sophisticated method of valuation? a) 3
b) 2
a) Using only one valuation multiple. c) 2
b) Comparing the subject company to d) 3.5
historical data.
c) Applying average multiples of comparable Answer: d) 3.5
companies.
d) Judging multiples based on arbitrary 17. Which company among E, F, and G has
criteria. the highest EV-Book Value?
Answer: c) Applying average multiples of a) Company E

comparable companies. b) Company F
c) Company G
d) The average of E, F, and G
14. What is the average EV-EBITDA for the
comparable companies (E, F, G)? Answer: b) Company F
a) 7.5 18. How is the P/E multiple expressed using

b) 8 symbols?
c) 10
d) 12.75 a) P0 / E0
b) E0 / P0
Answer: d) 12.75 c) P1 / E1
d) E1 / P0
15. What does EV-Book Value represent in
the context of valuation multiples? Answer: a) P0 / E0
a) The ratio of enterprise value to Earnings

Before Interest, Taxes, Depreciation &
Amortization.
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19. What is the numerator of the P/E c) Expected earnings per share for the
multiple? following year.
d) Earnings per share for the last 12 months.
a) Expected earnings per share for the
current year. Answer: c) Expected earnings per share for
b) Market price per share. the following year.
c) Earnings per share for the previous
financial year. 22. What is the denominator of the P/E
d) Expected earnings per share for the multiple?
following year.
a) Market price per share.
Answer: b) Market price per share. b) Earnings per share for the last 12 months.
c) Expected earnings per share for the
20.How is the price-to-earnings (P/E) current year.
multiple defined? d) Expected earnings per share for the
following year.
a) Market price per share divided by
expected earnings per share a year from Answer: c) Expected earnings per share for
now. the current year.
b) Market price per share divided by
earnings per share for the previous financial 23. What does (1-b) represent in the given
year. equation 𝐏𝟎/𝐄𝟏=(𝟏−𝐛)/(𝐫−𝐑𝐎𝐄∗𝐛)?
c) Earnings per share for the previous
financial year divided by market price per a) Return on Equity (ROE).
share. b) Dividend payout ratio.
d) Expected earnings per share for the c) Cost of equity (r).
current year divided by market price per d) Plough back ratio or retention ratio (b).
share.
Answer: b) Dividend payout ratio.
Answer: b) Market price per share divided
by earnings per share for the previous 24. How is the dividend payout ratio
financial year. calculated in the context of the given
equation?
21. What does "E1" represent in the a) (𝐃𝟎/𝐄𝟎) / (𝐃𝟏/𝐄𝟏).

expression for the P/E multiple? b) (𝐃𝟎/𝐄𝟎) * (𝐃𝟏/𝐄𝟏).
c) (𝐃𝟏/𝐄𝟏) / (𝐃𝟎/𝐄𝟎).
a) Earnings per share for the previous d) (𝐃𝟏/𝐄𝟏) * (𝐄𝟎/𝐃𝟎).
financial year.
b) Expected earnings per share for the Answer: c) (𝐃𝟏/𝐄𝟏) / (𝐃𝟎/𝐄𝟎).
current year.
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25. In the example, what is the retention c) (Shareholders' funds - Preferred capital) /
ratio (b) for V & S Company? Total equity.
d) (Shareholders' funds + Preferential
a) 0.2 capital) / Total equity.
b) 0.3
c) 0.7 Answer: a) (Shareholders' funds -
d) 0.15 Preferential capital) / Number of outstanding
equity shares.
Answer: c) 0.7
29.What is the numerator of the P/B
26. What is the calculated P/E multiple for V multiple?
& S Company in the example? a) Rate of return required by equity investors
(r).
a) 30 b) Dividend payout ratio.
b) 0.15 c) Price per share (P0).
c) 0.07 d) Growth rate (g).
d) 20
Answer: c) Price per share (P0).
Answer: a) 30
30. What does "g" represent in the given
equation 𝐏𝟎/𝐁𝟎 = 𝐑𝐎𝐄(𝟏−𝐛)/(𝐫−𝐠)?
27. What does the denominator of the Price
to Book (P/B) multiple, denoted by the letter a) Dividend payout ratio.
B, represent? b) Growth rate.
c) Return on equity (ROE).
a) Earnings per share (EPS). d) Rate of return required by equity
b) Dividend payout ratio. investors (r).
c) Return on equity (ROE).
d) Book value per share. Answer: b) Growth rate.
Answer: d) Book value per share. 31. According to the equation 𝐏𝟎/𝐁𝟎 =
𝐑𝐎𝐄(𝟏−𝐛)/(𝐫−𝐠), what is (1 - b)?
28. How is the book value per share (B)
calculated in the context of the given a) Dividend payout multiple.
equation? b) Return on equity (ROE).
c) Growth rate (g).
a) (Shareholders' funds - Preferential capital) d) Rate of return required by equity
/ Number of outstanding equity shares. investors (r).
b) (Shareholders' funds + Preferred capital) /
Number of outstanding equity shares. Answer: a) Dividend payout multiple.
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32. What does EV in EV/EBITDA multiple B) Enterprise Value to Equity before Interest,
stand for? Taxes, Depreciation, and Amortization
C) Enterprise Value to Earnings before
a) Equity Value Interest, Taxes, Depreciation, and
b) Enterprise Value Amortization
c) Earnings Value D) Earnings Value to Equity before Interest,
d) Equity-to-EBITDA Taxes, Depreciation, and Amortization
Answer: b) Enterprise Value Answer: C) Enterprise Value to Earnings

33. What is the primary focus of enterprise before Interest, Taxes, Depreciation, and
value multiples, as opposed to equity Amortization
multiples?
36. How is the Enterprise Value to Earnings
A) Emphasis on equity value before Interest, Taxes, Depreciation, and
B) Emphasis on the value of assets Amortization (EV/EBITDA) multiple
C) Emphasis on the value of the business calculated?
itself
D) Emphasis on sales value A) Earnings Value / (Interest + Taxes +
Depreciation + Amortization)
Answer: C) Emphasis on the value of the B) Enterprise Value / Earnings
business itself C) Enterprise Value / (Interest + Taxes +
Depreciation + Amortization)
34. Which of the following is not an example D) Enterprise Value / Earnings before
of enterprise value multiples? Interest, Taxes, Depreciation, and
Amortization
A) EV/EBITDA multiple
B) P/E ratio Answer: D) Enterprise Value / Earnings
C) EV/FCFF multiple before Interest, Taxes, Depreciation, and
D) EV/Sales multiple Amortization
Answer: B) P/E ratio 37. What does the formula 𝐄𝐕/𝐄𝐁𝐈𝐓𝐃𝐀

represent in the context of basic
35. What does EV/EBITDA stand for in the determinants?
Enterprise Value to Earnings before Interest,
Taxes, Depreciation, and Amortization A) Return on invested capital
multiple? B) Enterprise value to EBITDA ratio
C) Weighted average cost of capital
A) Earnings Value to Earnings before D) Growth rate
Interest, Taxes, Depreciation, and
Amortization Answer: B) Enterprise value to EBITDA
ratio
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38. In the given formula, what does ROIC C) Enterprise value to earnings before
stand for? income and taxes
D) Equity value to earnings before income
A) Rate of Inflation Calculation and taxes
B) Return on Invested Capital
C) Return on Inventory Control Answer: A) Enterprise value to earnings
D) Rate of Investment and Cost before interest and taxes
43. In the formula for EV/EBIT, what does
Answer: B) Return on Invested Capital EBIT stand for?
39. What is represented by 'g' in the
formula? A) Earnings Before Income and Taxes
A) Gross Margin B) Equity Before Income and Taxes
B) Growth Rate C) Earnings Before Interest and Taxes
C) Goodwill D) Equity Before Interest and Taxes
D) Gross Profit
Answer: C) Earnings Before Interest and
Answer: B) Growth Rate Taxes
40. What does 'DA' stand for in the formula? 44. In the basic determinants formula for
EV/EBIT, what does 't' represent?
A) Dividend Allocation
B) Depreciation and Amortization A) Total assets
C) Debt Amortization B) Tax rate
D) Discounted Assets C) Target growth rate
D) Total debt
Answer: B) Depreciation and Amortization Answer: B) Tax rate
41. What does the term 't' represent in the 45. What is the numerator in the basic
formula? determinants formula for EV/EBIT?
A) Total assets
B) Tax rate A) 1 - tax rate
C) Target growth rate B) Weighted average cost of capital
D) Total debt C) 1 - reinvestment rate
D) Growth rate
Answer: B) Tax rate Answer: A) 1 - tax rate
42. What does the EV/EBIT ratio represent?
A) Enterprise value to earnings before

interest and taxes
B) Equity value to earnings before interest
and taxes
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46. What does the EV/FCFF ratio measure? 50. In the given example, what is the
calculated value for EV/FCFF?
A) Enterprise value to free cash flow to
equity A) 18.75
B) Equity value to free cash flow to equity B) 19.50
C) Enterprise value to free cash flow to firm C) 20.00
D) Equity value to free cash flow to firm D) 21.25
Answer: C) Enterprise value to free cash Answer: C) 20.00

flow to firm
51. What does the EV/BV ratio measure?
47. In the formula for EV/FCFF, what does
FCFF stand for? A) Enterprise value to book value of assets
B) Equity value to book value of assets
A) Free Cash Flow to Firm C) Enterprise value to book value of equity
B) Firm Capital Financing Factor D) Equity value to book value of equity
C) Financial Cash Flow to Firm
D) Free Cost of Financing Factor Answer: C) Enterprise value to book value
of equity
Answer: A) Free Cash Flow to Firm 52. In the formula for EV/BV, what does BV
stand for?
48. What is represented by 'WACC' in the
basic determinants formula for EV/FCFF? A) Book Value
B) Business Value
A) Weighted Average Cost of Capital C) Balance Value
B) Weighted Average Cash Conversion D) Basic Value
C) Working Asset Capital Cost
D) Weighted Average Capital Contribution Answer: A) Book Value
Answer: A) Weighted Average Cost of 53. What is represented by 'ROIC' in the

Capital basic determinants formula for EV/BV?
49. In the basic determinants formula for A) Rate of Investment Calculation

EV/FCFF, what does 'g' represent? B) Return on Invested Capital
C) Return on Inventory Control
A) Gross Margin D) Rate of Income Contribution
B) Growth Rate
C) Goodwill Answer: B) Return on Invested Capital
D) Gross Profit
Answer: B) Growth Rate

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54. In the basic determinants formula for Answer: B) Growth Rate

EV/BV, what does 'g' represent?
58. In the basic determinants formula for
A) Gross Margin EV/Sales, what does 'WACC' represent?
B) Growth Rate
C) Goodwill A) Weighted Average Cost of Capital
D) Gross Profit B) Weighted Average Cash Conversion
C) Working Asset Capital Cost
Answer: B) Growth Rate D) Weighted Average Capital Contribution
Answer: A) Weighted Average Cost of

55. In the given example, what is the Capital
calculated value for EV/BV?
59. what is the calculated value for EV/Sales?
A) 2.5
B) 3.0 A) 0.50
C) 3.5 B) 0.62
D) 4.0 C) 0.72
D) 0.85
Answer: C) 3.5
Answer: C) 0.72
56. In the formula for EV/Sales, what does 'S'
represent?
A) Sales
B) Shareholders
C) Savings
D) Securities
Answer: A) Sales
57. What is represented by 'g' in the basic

determinants formula for EV/Sales?
A) Gross Margin
B) Growth Rate
C) Goodwill
D) Gross Profit
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CHAPTER 16:- Special cases of valuation

1) What is the primary focus of this unit? 5) What argument is made against valuation
A) Financial Analysts methods in the passage?
B) Corporate Valuations
C) Special Cases of Valuation A) Overemphasis on intangible assets
D) Business Valuations B) Comprehensive consideration of
Answer: C) Special Cases of Valuation intangible assets
C) Undervaluation of intangible assets
2) What is discussed in the unit related to D) Lack of differentiation between visible
intangibles? and invisible assets
A) Visible assets Answer: C) Undervaluation of intangible

B) Undervaluation of assets assets
C) Human nature
D) Goodwill, brand names, and other 6) What type of intangible assets can be
intangible assets accurately valued using traditional
discounted cash flow (DCF) models?
Answer: D) Goodwill, brand names, and
other intangible assets A) Assets with no monetary value
B) Tangible fixed assets
3) Why is there a concern about C) Intangible fixed assets
undervaluation in the context of intangible D) Commercially developed patents,
assets? copyrights, trademarks, and licenses
A) Lack of interest in financial analysis Answer: D) Commercially developed

B) Comprehensive consideration of patents, copyrights, trademarks, and licenses
intangible assets
C) Overemphasis on visible assets 7) How are fixed assets classified as per the
D) Little consideration for intangible assets Companies Act 2013?
Answer: D) Little consideration for A) Tangible and intangible fixed assets

intangible assets B) Commercial and non-commercial fixed
assets
4) What is mentioned as part of the "not C) Short-term and long-term fixed assets
visible" category of assets? D) Monetizable and non-monetizable fixed
A) Tangible assets assets
B) Devoted employees
C) Financial analysts Answer: A) Tangible and intangible fixed
D) Corporate valuations assets
Answer: B) Devoted employees
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8) According to the passage, what is an A) Double counting

example of an intangible asset with
monetary value? B) Undervaluation
C) Overestimation
A) Spectrum
B) Software D) Inflation
C) Computer systems
D) Balance sheet Answer: A) Double counting
Answer: A) Spectrum 12) What is mentioned as an example of

enigmatic intangible assets in the passage?
9) What is mentioned as an example of
A) Trademarks
intangible assets that are difficult to single
out and value on their own? B) Due diligence
A) Trademarks C) Undeveloped patents
B) Commercially developed patents D) Licenses
C) Brand name and reputation Answer: C) Undeveloped patents
D) Licenses 13) Why does the Company face a big
challenge in valuing undeveloped patents?
Answer: C) Brand name and reputation
A) Lack of monetary value
10) According to the passage, what may be
contended about traditional discounted cash B) Double counting
flow (DCF) valuation techniques for brand
names and reputation? C) Option available to the Company
regarding their use
A) Inability to accurately capture their values
D) Undervaluation
B) Dependence on tangible fixed assets
Answer: C) Option available to the
C) Ability to accurately capture their values Company regarding their use
D) Requirement for additional premiums
Answer: C) Ability to accurately capture

their values
11) What concern is raised about adding a

premium for intangible assets after using the
discounted cash flow (DCF) valuation?
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14) What has developed into the most companies like Bharat Biotech, Serum
important category of assets over the past Institute, Wipro, Flipkart
quarter of a century? Answer: D)
A) Tangible assets
B) Intellectual capital 18) What are examples of intangible assets
C) Undeveloped patents mentioned in the passage?
D) Due diligence
Answer: B) Intellectual capital A) Land, buildings, and factories
B) Brand recognition, customer loyalty, and
15) What does the term "intellectual capital" intellectual property
refer to in the context of the passage? C) Tangible fixed assets
D) Traditional accounting standards
A) Physical assets
B) Patents, trademarks, and copyrights Answer: B) Brand recognition, customer
C) Undeveloped patents loyalty, and intellectual property
D) Corporate giants
19) What is the first problem mentioned
Answer: B) Patents, trademarks, and with conventional accounting standards
copyrights regarding intangible assets?
A) Overestimation of their value

16) What examples of Indian companies are B) Gross underestimation or complete
mentioned that have traditionally held ignorance of their value
tangible assets? C) Overemphasis on their value
A) Flipkart, Serum Institute, Wipro D) Proper estimation of their value
B) Tata Steel, TCS, Infosys
C) Apple, Coca-Cola, PepsiCo Answer: B) Gross underestimation or
D) Bharat Biotech, Indian Hotels, Godrej complete ignorance of their value
Answer: B) Tata Steel, TCS, Infosys
20) According to the passage, what is the
17) What is mentioned as a new breed of second reason why intangible assets are
companies in the last fifty years that derive important for organizations?
the majority of their value from intangible
assets? A) They contribute to tangible assets
B) They have no impact on market valuations
A) Traditional manufacturing companies C) They significantly contribute to market
B) Tangible asset-based companies valuations
C) Service-based companies D) They are easy to measure
D) Apple, Coca-Cola, PepsiCo, Amazon, Answer: C) They significantly contribute to
Microsoft, Intel, Facebook, Pfizer, and Indian market valuations
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21) What evidence is mentioned regarding C) Intangible Asset Market Value

the significance of brand names in D) Indian Asset Market Value
consumers' product companies?
Answer: C) Intangible Asset Market Value
A) They explain less than half of the value
B) They have no impact on the value 25) How is the implied market value of
C) They explain more than half of the value intangibles calculated for S&P 500
D) They are irrelevant to market valuations companies?
Answer: C) They explain more than half of A) Market cap + Book value of total liabilities
the value B) Market cap - Book value of total liabilities
C) Market cap + Book value of total liabilities
22) How does the failure to value intangible - Book value of intangibles
assets impact market measures of value? D) Market cap - Book value of intangibles
A) It has no impact on market measures of Answer: C) Market cap + Book value of

value total liabilities - Book value of intangibles
B) It increases P/E ratios
C) It distorts market measures of value like 26) What source of information for valuation
P/E ratios and EV/EBITDA multiples is mentioned in the passage?
D) It decreases market valuations
A) Market cap
Answer: C) It distorts market measures of B) Implied market value
value like P/E ratios and EV/EBITDA multiples C) Accounting statements
D) Book value of intangibles
23) According to Ocean Tome, what
proportion of market value was attributable Answer: C) Accounting statements
to intangible assets between 1975 and 2015?
27) What is one argument mentioned in the
A) 50% passage regarding the valuation of intangible
B) 65% assets?
C) 84%
D) 90% A) It is flawless
B) It suffers from the same limitations as
Answer: C) 84% accounting measures
C) It is not influenced by accounting
24) What does IAMV stand for in the context statements
of the passage? D) It is not important for financial statements
A) International Asset Management
Valuation Answer: B) It suffers from the same
B) Intellectual Asset Management Value limitations as accounting measures
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28) What has provided an impetus for Answer: D) They create cash flows and are
valuation analysts to take a closer look at the attached to a particular product or product
valuation of intangible assets? line
A) Market cap 31) How is the value of trademarks,

B) Pressure on accountants to reflect the copyrights, and licenses determined
value of intangible assets accurately on according to the passage?
financial statements
C) Book value of total liabilities A) Solely by the expenses connected with
D) Implied market value production
B) Solely by the exclusive right
Answer: B) Pressure on accountants to C) By the infinite lifespan of the assets
reflect the value of intangible assets D) By the cash flows that can be produced as
accurately on financial statements a result of holding the exclusive right
29) According to the passage, what has the Answer: D) By the cash flows that can be
pressure on accountants to more accurately produced as a result of holding the exclusive
reflect the value of intangible assets right
provided?
32) What is mentioned as a direct result of
A) A hindrance for valuation analysts the owner's authority over trademarks,
B) An impetus for valuation analysts to copyrights, or licenses?
reevaluate how they value intangible assets
C) No impact on valuation analysts A) Qualitative distinction from tangible
D) A reason to ignore intangible assets in assets
valuation B) Exclusive right to manufacture or sell
associated goods or render associated
Answer: B) An impetus for valuation services
analysts to reevaluate how they value C) Infinite lifespan of assets
intangible assets D) Difficulties in evaluating the assets
30) What is a characteristic of independent Answer: B) Exclusive right to manufacture

and cash-flow-generating intangible assets or sell associated goods or render associated
mentioned in the passage? services
A) They have an infinite lifespan

B) They are qualitatively distinct from
tangible assets
C) They are difficult to evaluate
D) They create cash flows and are attached
to a particular product or product line
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33) According to the passage, what is a 36) What is an alternate valuation method
common characteristic of independent and mentioned in the passage for copyrights and
cash-flow-generating intangible assets? trademarks?
A) Market value
A) Infinite lifespan B) Historical value
B) Qualitative distinction from tangible C) Relative value
assets D) Intrinsic value
C) Finite lifespan with estimated cash flows
D) Lack of connection to a particular product Answer: C) Relative value
or product line
37) How is the multiple for relative value
Answer: C) Finite lifespan with estimated often estimated?
cash flows
A) By estimating the expected cash flows
34) How is the value of copyrights and B) By looking at the prices at which
trademarks determined, according to the comparable assets have been sold
passage? C) By taking the present value of the asset
D) By reflecting uncertainty associated with
A) By the expenses connected with the asset
production
B) By the exclusive right Answer: B) By looking at the prices at
C) Only in one way which comparable assets have been sold
D) By the additional returns received as a
result of possessing the exclusive right 38) What is an example of a franchise
mentioned in the passage?
Answer: D) By the additional returns A) Ola
received as a result of possessing the B) Domino's Pizza
exclusive right C) McDonald's
D) All of the above
35) What is the second step in obtaining a
discounted cash flow valuation of an asset? Answer: D) All of the above
A) Applying a multiple to revenues 39) What is the responsibility of the

B) Estimating the expected cash flows from franchisee in a franchise scenario?
owning the asset
C) Taking the present value of the asset A) To operate the franchise
D) Reflecting uncertainty associated with the B) To establish the brand name
asset C) To set the initial charge
D) To support the corporation
Answer: A) Applying a discount rate to cash
flows Answer: A) To operate the franchise
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40) What does the franchisee receive in 43) What might an organization need to do
exchange for paying the franchisor? in order to be successful in resolving
operational issues, according to the
A) Initial charge information provided?
B) Ongoing annual cost
C) Power of the brand name and support of a) Replace ageing machinery
the corporation b) Retrain the existing workforce
D) Advertising backing c) Make changes to its senior management
d) Lay off a significant section of the
Answer: C) Power of the brand name and personnel
support of the corporation
Answer: c) Make changes to its senior
management
41) Why is it challenging to put a monetary
value on intangible assets? 44) How many distinct approaches are
mentioned for arriving at an estimate of the
A) They provide cash flows on their own worth of intangible assets?
B) They do not garner attention
C) They do not enable a firm to charge higher A) One
prices B) Two
D) They do not provide cash flows on their C) Three
own D) Four
Answer: D) They do not provide cash flows Answer: C) Three

on their own
42) What is mentioned as a result of 45) What does capitalizing expenses involve?
intangible assets enabling a firm to charge
higher prices for its products? A) Recording expenses on the income
statement
A) Reduced cash flows B) Recording expenses on the balance sheet
B) Lower value of intangible assets C) Ignoring expenses for accounting
C) Greater amount of cash flows for the purposes
company D) Recognizing expenses immediately
D) Inability to estimate the worth of
intangible assets Answer: B) Recording expenses on the
balance sheet
Answer: C) Greater amount of cash flows
for the company
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46) What is the benefit of capitalizing C) It is not used for tangible assets
expenses, as mentioned in the passage? D) It does not consider advertising
expenditures
A) Immediate recognition of expenses
B) Delaying full recognition of expenses Answer: D) It does not consider advertising
C) Decreasing the market value of assets expenditures
D) Eliminating the need for amortization
50) What is the requirement for discounting
Answer: B) Delaying full recognition of anticipated increases in cash flows for a
expenses company's intangible asset?
47) What is the least subjective approach A) Isolating the percentage of total cash
mentioned for determining the value of an flows attributable to the intangible asset
asset? B) Ignoring the percentage of total cash
flows
A) Market value approach C) Including all cash flows without isolation
B) Capital investment approach D) Using a fixed discount rate for all
C) Amortization approach situations
D) Depreciation approach
Answer: A) Isolating the percentage of
Answer: B) Capital investment approach total cash flows attributable to the intangible
asset
48) What is the process known as when
companies acquire new assets with long- 51) What is required to be discounted back
term lifespans and amortize or depreciate in the discounted cash flow valuation?
the costs?
A) Current cash flows
A) Capitalization B) Anticipated increase in cash flows
B) Recognition C) Historical cash flows
C) Amortization D) Fixed discount rate
D) Depreciation
Answer: B) Anticipated increase in cash
Answer: A) Capitalization flows
49) What may be a limitation of the capital

investment approach mentioned in the
passage?
A) It matches the asset's market value

accurately
B) It is highly subjective
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52) What is the rate used for discounting b) Temporary issues like a strike or product
back cash flows in the discounted cash flow recall
valuation? c) Long-term strategic planning
d) Positive economic conditions
A) Fixed rate
B) Rate appropriate for the situation Answer: b) Temporary issues like a strike
C) Standard rate or product recall
D) Market rate
56) What is the suggested adjustment
Answer: B) Rate appropriate for the process for companies with temporary issues
situation affecting earnings?
53) What is the primary focus of relative a) Ignore the issues and use reported
valuation in the context of intangible assets? earnings
b) Remove the entire earnings of the
A) Isolating the effect of tangible assets company
B) Comparing market values of companies c) Adjust for the portion of expenses
with intangible assets to those without associated with the temporary problems
C) Ignoring market values d) Increase the reported earnings
D) Setting fixed valuation standards
Answer: c) Adjust for the portion of
Answer: B) Comparing market values of expenses associated with the temporary
companies with intangible assets to those problems
without
57) When might normalized earnings be
54) How can the disparity in market values more appropriate for valuation?
between companies with and without
intangible assets be explained in relative a) For companies with consistently high
valuation? earnings
b) For companies with temporary issues
A) Existence of tangible assets c) For cyclical and commodity companies
B) Non-existence of intangible assets d) For companies with positive economic
C) Existence of intangible assets conditions
D) Use of a fixed discount rate
Answer: c) For cyclical and commodity
Answer: C) Existence of intangible assets companies
55) Why might a company have negative

earnings?
a) Permanent financial instability

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58) Why are cyclical companies susceptible 61) What makes the valuation process more
to fluctuations in earnings? challenging for companies with long-term
strategic or operational problems?
a) Due to permanent financial instability
b) Because of strikes and product recalls a) Clear financial stability
c) The overall economy's impact on their b) Predictable workforce issues
business c) Assumptions about the company's ability
d) Stable commodity prices to overcome problems
d) Short-term investments
Answer: c) The overall economy's impact
on their business Answer: c) Assumptions about the
company's ability to overcome problems
59) How does the adjustment process differ
for companies with only temporary issues 62) What factors contribute to long-term
compared to cyclical companies? strategic or operational problems in a
company?
a) There is no difference; the process is the
same a) High profitability
b) Cyclical companies require a more b) Obsolete plants, inadequate workforce
complex adjustment training, and poor past investments
c) Temporary issues only require adjusting c) Temporary challenges
for specific expenses d) Excessive borrowing
d) Both a and b
Answer: b) Obsolete plants, inadequate
Answer: c) Temporary issues only require workforce training, and poor past
adjusting for specific expenses investments
60) . What makes the valuation process more 63) Why is it important to make assumptions
challenging for companies with long-term about a company's ability to outlive its
strategic or operational problems? problems during the valuation process?
a) Clear financial stability a) To ignore the problems and focus on

b) Predictable workforce issues short-term gains
c) Assumptions about the company's ability b) To determine the immediate impact on
to overcome problems earnings
d) Short-term investments c) To assess the company's long-term
viability and potential restructuring
Answer: c) Assumptions about the d) To increase reported earnings
company's ability to overcome problems
Answer: c) To assess the company's long-
term viability and potential restructuring
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64) How does the valuation approach differ a) Standardization is always the same
for companies with negative earnings due to b) It depends on the company's size
excessive borrowing? c) It varies according to the specifics of the
challenge
a) Ignore the negative earnings d) It is not relevant to the valuation process
b) Increase the valuation without
adjustments Answer: c) It varies according to the
c) Consider the possibility of loan default specifics of the challenge
d) Assume the borrowing will lead to higher
future earnings 68) What should be considered when a
company's bad year is attributed to unique
Answer: c) Consider the possibility of loan and temporary problems?
default
a) Ignore the occurrence and use reported
65) When are earnings anticipated to earnings
improve for companies facing momentary b) Estimate earnings before the occurrence
challenges? and utilize them for forecasting
c) Only focus on cash flows and ignore
a) Never, as the challenges are permanent earnings
b) In the distant future d) Increase earnings artificially
c) In the not-too-distant future
d) Immediately after the challenges arise Answer: b) Estimate earnings before the
occurrence and utilize them for forecasting
Answer: c) In the not-too-distant future
69) In cases where a loss is linked to a
specific occurrence, what should be
66) What is the primary solution suggested deducted when estimating earnings before
for companies with negative earnings? the occurrence?
a) Maintain the present earnings a) Deduct only the direct expense

b) Replace present earnings with normalized b) Deduct the expense and tax benefits
profits achieved
c) Ignore the earnings and focus on cash flow c) Deduct only the tax benefits
d) Increase expenses to offset losses d) Deduct future earnings
Answer: b) Replace present earnings with Answer: b) Deduct the expense and tax
normalized profits benefits achieved
67) How does the standardization of

earnings change based on the nature of the
challenge a company faces?
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70) What makes accomplishing the goal a) Stability and independence from the
more difficult when dealing with a loss economy
whose source is less clear? b) Inherent instability and sensitivity to
changes in the economy
a) The company's long-term viability c) Consistent growth regardless of economic
b) Lack of prior financial records conditions
c) Clarity of the loss source d) Predictability during economic recessions
d) Transparency in expense reporting
Answer: b) Inherent instability and
Answer: c) Clarity of the loss source sensitivity to changes in the economy
71) Why is it essential to confirm that a loss 74) When are earnings expected to rise for
is genuinely transitory before proceeding cyclical companies?
with the valuation process?
a) During economic recessions
a) To avoid using normalized profits b) In times of economic expansion
b) To assess the seriousness of long-term c) Regardless of economic conditions
issues d) During commodity price cycles
c) To increase reported losses
d) To speed up the valuation process Answer: b) In times of economic expansion
Answer: b) To assess the seriousness of 75) What can happen if the current year's
long-term issues results are used as the base year earnings for
cyclical or commodity companies?
72) How is normalization achieved for a) Accurate estimations of value

spending items that appear abnormally high b) Deceptive estimations of value
in comparison to prior years? c) Stable earnings regardless of economic
changes
a) Ignore the abnormal values d) Immediate normalization of earnings
b) Increase reported expenses
c) Normalize by taking the average of values Answer: b) Deceptive estimations of value
from earlier years
d) Deduct the abnormal values
Answer: c) Normalize by taking the average

of values from earlier years
73) What characterizes earnings at cyclical

companies?
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76) What characterizes commodity Answer: b) Making judgments on the

companies facing price cycles? severity of the issues and their potential
resolution
a) Stable commodity prices
b) Consistent high prices for the commodity 79) What is the focus when businesses
c) Periods of high prices followed by periods encounter negative or decreased profitability
of low prices due to strategic issues?
d) Unaffected by economic fluctuations
a) Permanent loss of market share
Answer: c) Periods of high prices followed b) Ignoring the issues for simplicity
by periods of low prices c) Analyzing product mixes, marketing
methods, and target audiences
77) How were earnings treated in the values d) Assuming bankruptcy is imminent
discussed for companies with long-term
issues? Answer: c) Analyzing product mixes,
marketing methods, and target audiences
a) Immediately changed to represent
abnormal levels 80) What can businesses prone to making
b) Quickly changed to reflect the expectation mistakes experience as a result of negative
of continued negative earnings or decreased profitability?
c) Adjusted to normal levels or the
expectation of the negative earnings ceasing a) Immediate recovery
d) Ignored in the valuation process b) Permanent loss of market share or
bankruptcy
Answer: c) Adjusted to normal levels or the c) Ignoring the mistakes for simplicity
expectation of the negative earnings ceasing d) Assuming profitability will improve
without changes
78) In cases where negative earnings are a
symptom of larger systemic issues, what Answer: b) Permanent loss of market share
judgments might be necessary during the or bankruptcy
valuation process?
a) Ignoring the issues for simplicity

b) Making judgments on the severity of the
issues and their potential resolution
c) Focusing only on short-term profitability
d) Assuming the issues will resolve
themselves over time
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81) What types of issues are businesses 84) How did Kodak perceive Americans'
susceptible to when it comes to product preference over Fuji Films during the
mixes, marketing methods, and target argument?
audiences?
a) Americans would always select Kodak
a) Short-term challenges only b) Americans preferred Fuji Films
b) Systemic issues with a permanent impact c) Both companies were equally popular
c) No issues, as they are immune to mistakes d) It didn't matter to Kodak
d) Long-term profitability without
fluctuations Answer: a) Americans would always select
Kodak
Answer: b) Systemic issues with a
permanent impact 85) What did Kodak focus on during the 0-
year period instead of adapting to
82) In the Kodak case mentioned, what is competition?
likely to be discussed in the continuation of
the section? a) Digital cameras
b) Film cameras
a) Immediate recovery strategies c) Videography
b) Positive financial results d) Media feedback
c) Analysis of systemic issues and potential
resolutions Answer: b) Film cameras
d) Ignoring strategic issues for simplicity
86) According to the information, what did
Answer: c) Analysis of systemic issues and Kodak disregard during this period?
potential resolutions
a) Market feedback
83) What did Kodak argue with Fuji Films b) Competitor strategies
about for over 0 years? c) Emerging technology
d) Foreign finance
a) The quality of film cameras
b) The benefits of traditional photography Answer: a) Market feedback
c) The usual procedure for examining digital
camera images
d) The popularity of printed images
Answer: c) The usual procedure for

examining digital camera images
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87) What surpassed traditional film photography, 91) What did Kodak prioritize over promoting
leading to Kodak falling behind? digital camera sales, leading to missed
opportunities?
a) Increased film camera sales
b) Lack of media coverage a) Effective strategy
c) Digital photography b) Modest acquisitions
d) Market stability c) Traditional film cameras
d) Foreign finance
Answer: c) Digital photography
Answer: b) Modest acquisitions
88) How did Kodak's marketing team respond to the
need for change? 92) Why couldn't Kodak compete with big companies
when it finally embraced digital cameras?
a) Ignored the need for change
b) Persuaded managers to change essential ideals a) Lack of technological advancements
c) Continued promoting film cameras b) Timing issues
d) Lacked competence in technology c) Effective strategy
d) Financial stability
Answer: b) Persuaded managers to change
essential ideals Answer: b) Timing issues
89) What did Kodak's management committee rely 93) What major decision did Kodak make in 00
on, despite concerns raised by a magazine reporter? regarding its product line?
a) Emerging technology a) Increased promotion of film cameras

b) Film cameras b) Ended sales of classic film cameras
c) Digital photography c) Focused on digital camera development
d) Foreign finance d) Expanded the workforce
Answer: b) Film cameras Answer: b) Ended sales of classic film cameras
90) What contributed to Kodak's downfall according 94) How did this decision impact Kodak's workforce?
to the information provided?
a) No impact on the workforce
a) Effective strategy b) Reduced workforce by one-fifth
b) Modest acquisitions c) Increased workforce by one-fifth
c) Digital camera sales d) Shifted workforce focus to technology
d) Technology and market changes
Answer: d) Technology and market changes Answer: b) Reduced workforce by one-fifth
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95) What significant event occurred to d) Personal computers

Kodak's stock before 0 ?
Answer: a) Mainframe computers
a) Stock hit $0.5 per share
b) Joined the S&P 500 index 99) Despite having the capability to develop
c) Became the top-performing stock an operating system for personal computers,
d) Increased by 50% what decision did IBM make?
Answer: a) Stock hit $0.5 per share a) Ceded the business to Microsoft
b) Developed its own operating system
96) What happened to Kodak's shares in the c) Competed aggressively with newcomers
year mentioned ( 0 ? d) Ignored the personal computer industry
a) Increased by 50% Answer: a) Ceded the business to

b) Maintained stability Microsoft
c) Fell over 50%
d) Joined the S&P 500 index
100) What valuable lessons remain from the
Answer: c) Fell over 50% Xerox Corporation case, despite the
company's comeback?
97) What posed a problem for IBM in the
980s according to the information provided? a) The importance of cost structures
b) The success of Xerox in the photocopier
a) Lack of innovation market
b) Dominant position in the personal c) The impact of technology on business
computer industry d) The decline of Asian competitors
c) Threats from Microsoft
d) Development of the personal computer Answer: c) The impact of technology on
industry business
Answer: d) Development of the personal 101) What market was Xerox successful in
computer industry for many years?
98) In which sector did IBM hold a dominant a) Fax machines

position that was threatened by the b) Printers
development of the personal computer c) Photocopiers
industry? d) E-mails
a) Mainframe computers Answer: c) Photocopiers

b) Operating systems
c) Software development
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102) During the 1970s and 1980s, which Answer: a) If Xerox had a bright future
competitors posed a challenge to Xerox in the
photocopier market? 106) What precipitated Xerox's downfall according
to the information provided?
a) European companies
b) Asian companies like Ricoh and Canon a) Competition from Asian companies
c) American companies b) Senior management's failure to notice emerging
d) Start-up companies technologies
c) Cost structures
Answer: b) Asian companies like Ricoh and Canon d) Xerox's early period of losses
103) What contributed to Xerox's recovery of a Answer: b) Senior management's failure to

portion of its market share after an early period of notice emerging technologies
losses?
a) Decreased competition 107) What unfortunate issue is highlighted

b) Improved cost structures regarding Xerox in the information provided?
c) Expansion into new markets
d) Technological advancements a) Lack of technological advancements
b) Failure to invent new technologies
Answer: b) Improved cost structures c) Inability to provide goods and services
d) Failure to utilize the technology it invented
104) What technological advancements contributed
to Xerox's fortunes deteriorating in the latter half of Answer: d) Failure to utilize the technology it
the 1990s? invented
a) Photocopier innovations 108) what contributes to increased profitability

b) E-mails, faxes, and low-cost printers and market value for companies?
c) Mainframe computers
d) Advanced manufacturing techniques a) Providing goods and services in a timely manner
b) Lowering production costs
Answer: b) E-mails, faxes, and low-cost printers c) Inventing new technologies
d) Ignoring technological advancements
105) By the end of the year 2000, what were people
beginning to wonder about Xerox's future? Answer: a) Providing goods and services in a
timely manner
a) If Xerox had a bright future
b) If Xerox would merge with other companies
c) If Xerox would enter new markets
d) If Xerox had overcome technological challenges
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109) what can cause businesses to gradually Answer: c) Labor expenses in the United
lose their competitive edge? Kingdom are significantly greater
a) Staying up with the times and replacing 112) What variable most accurately
assets evaluates the efficiency of an operating
b) Utilizing the most recent technologies system?
c) Focusing on timely and cost-effective
services a) Revenue
d) Failure to stay up with the times, replace b) Operational margin
assets, and keep up with recent technologies c) Company size
d) Pre-tax operating margin improvement
Answer: d) Failure to stay up with the
times, replace assets, and keep up with Answer: b) Operational margin
recent technologies
113) What is typically indicative of
110) How might the expenses of producing companies with problems in their operating
one metric ton of steel be affected for an systems?
older steel firm with outdated factories and
equipment? a) High operational margins
b) Low operational margins
a) The expenses will be lower c) Consistent revenue growth
b) The expenses will be the same as in the d) Large company size
industry
c) The expenses will be higher Answer: b) Low operational margins
d) The expenses are unrelated to the age of
the firm 114) What determines the rate at which
operational margins will converge for
Answer: c) The expenses will be higher companies with operating system problems?
111) In what circumstance might the issue be a) Company's age

related to labor expenses for a steel b) Revenue growth
company in the United Kingdom compared c) Various factors, including company size
to an equivalent company in Asia? d) Efficiency of competitors
a) The United Kingdom has lower labor Answer: c) Various factors, including
expenses company size
b) The issue is unrelated to labor expenses
c) Labor expenses in the United Kingdom are
significantly greater
d) Labor expenses in Asia are significantly
greater
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115) what is the relationship between the a) External limitations

time required to eradicate inefficiencies and b) Government restrictions
the size of the company? c) Scope of change
d) Nature of the inefficiency
a) Inversely proportional
b) Proportional Answer: d) Nature of the inefficiency
c) Unrelated
d) Determined by the revenue growth 119) What is an example of an efficiency that
can be swiftly addressed by a company?
Answer: b) Proportional
a) Retraining the workforce
116) Using the given example, what is b) Laying off personnel
needed for a company with revenues of Rs. c) Replacing ageing machinery
000 crores to achieve a 5% improvement in d) Addressing government restrictions
its pre-tax operating margin?
Answer: c) Replacing ageing machinery
a) Reduce costs by Rs. 50 crores
b) Increase revenue by Rs. 50 crores 120) What external factors frequently place
c) Maintain current costs limitations on the scope and velocity of
d) Reduce costs by Rs. 5 crores change in companies?
Answer: a) Reduce costs by Rs. 50 crores a) Union contracts

b) Ageing machinery
117) How does the time required to correct c) Government restrictions
inefficiencies vary based on aspects of the d) Inventory management systems
inefficiency?
Answer: c) Government restrictions
a) It is the same for all inefficiencies
b) Some inefficiencies can be corrected 121) In the context of having more workers
significantly faster than others than needed, what might prevent a company
c) It is unrelated to the type of inefficiency from laying off a significant section of
d) It depends on the company's age personnel?
Answer: b) Some inefficiencies can be a) Social pressure

corrected significantly faster than others b) Contractual constraints
c) Government restrictions
118) What factor determines the time it d) Inefficient inventory management
takes to address inefficiencies, such as
replacing machinery or retraining a Answer: b) Contractual constraints
workforce?
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122) Why might businesses be unwilling to

lay off personnel despite having more
workers than needed?
a) Social pressure
b) Inefficient inventory management
c) Government restrictions
d) All of the above
Answer: d) All of the above
123) What is one of the most important

ingredients for a successful turnaround in
addressing operational issues?
a) External limitations
b) Ageing machinery
c) Quality of management willing to embrace
changes
d) Scope of change
Answer: c) Quality of management willing

to embrace changes
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CHAPTER 17:- Mergers, Acquisitions and Restructuring

1. Why has the reorganization of a business become d) Joint venture formation
an integral aspect of modern business operations?
Answer: c) Additional investments in plant and
a) To maintain the status quo machinery
b) Due to globalization and the loosening of
constraints 5. What is an example of external restructuring
c) To restrict competition mentioned in the text?
d) To avoid free trade
a) Joint venture formation
Answer: b) Due to globalization and the loosening b) Selling non-core businesses
of constraints c) Additional investments in research and
development
2. What has emerged as a result of globalization d) Demerger
and free trade, requiring businesses to reorganize?
Answer: b) Selling non-core businesses
a) Increased government controls
b) Global monopolies 6. How can external restructuring occur, as
c) New waves of competition mentioned in the text?
d) Reduced business strategies
a) Through government interventions
Answer: c) New waves of competition b) Through trade restrictions
c) Through mergers and acquisitions, joint venture
3. What is typically involved in reorganizational formation, and strategic alliances
restructuring, indicating significant organizational d) Through constraints on competition
changes?
Answer: c) Through mergers and acquisitions, joint
a) Maintaining the status quo venture formation, and strategic alliances
b) Incremental adjustments
c) A shift in business strategies 7. What does corporate re-structuring encompass?
d) Consistent operations
a) Only modifications to financial structure
Answer: c) A shift in business strategies b) Changes in ownership structure only
c) Changes to assets, financial structure, ownership
4. What might internal restructuring involve, structure, and operations
according to the information provided? d) Contraction of operations only
a) Selling non-core businesses Answer: c) Changes to assets, financial structure,

b) Mergers and acquisitions ownership structure, and operations
c) Additional investments in plant and machinery
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8. What are the most prevalent types of corporate a) Thousands

restructuring mentioned in the text? b) Hundreds
c) Tens
a) Market expansions d) None
b) Product diversification
c) Mergers, acquisitions, and takeovers; financial Answer: b) Hundreds
restructuring and reorganization; divestitures, de-
mergers, and spins; leveraged buyouts; and 12. What has exploded in India in the previous
management buyouts decade according to the text?
d) Employee training programs
a) Economic downturn
Answer: c) Mergers, acquisitions, and takeovers; b) Corporate restructuring, including mergers,
financial restructuring and reorganization; acquisitions, and other related activities
divestitures, de-mergers, and spins; leveraged c) Government interventions
buyouts; and management buyouts d) Financial constraints
9. What is the subject that has garnered the Answer: b) Corporate restructuring, including
greatest discussion nowadays in corporate mergers, acquisitions, and other related activities
restructuring?
13. What prompted international investors to seek
a) Leveraged buyouts alternate locations around 2016?
b) Management buyouts
c) Mergers and acquisitions (M&A) a) Record-high corporate control market
d) Financial restructuring b) Rising home country economies
c) Recession in home countries
Answer: c) Mergers and acquisitions (M&A) d) Stable Euro Zone
10. Where is M&A activity generally seen as typical Answer: c) Recession in home countries
business strategic practice?
14. What macroeconomic factors contributed to the
a) Only in Japan adverse climate around 2016, according to the text?
b) Only in the United States
c) Only in Europe a) Economic growth
d) Worldwide, including in India b) Euro Zone stability
c) Inflation, fiscal deficit, and currency depreciation
Answer: d) Worldwide, including in India d) Booming stock markets
11. How often do mergers and acquisitions take Answer: c) Inflation, fiscal deficit, and currency
place annually in Japan, the United States, and depreciation
Europe according to the text?
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15. According to Bloomberg data in June 2022, what c) $56.2 billion

was the total value of mergers and acquisitions d) $5 5 billion
activity recorded in India in the second quarter of
2022? Answer: d) $5 5 billion
a) $3 1 billion 19. What was the transaction value of the merger

b) $56.2 billion between Mindtree Ltd. and Larsen & Toubro
c) $8 3 billion InfoTech Ltd.?
d) $13 billion
a) $13 billion
Answer: c) $8 3 billion b) $ 3 billion
c) $56.2 billion
16. What record did the second quarter of 2022 set d) $5 5 billion
in terms of mergers and acquisitions activity in
India? Answer: b) $ 3 billion
a) Surpassed the third quarter of 2019 by $13 billion

b) Surpassed the third quarter of 2019 by more than 20. Who controlled both companies, Mindtree Ltd.
twice the amount and Larsen & Toubro InfoTech Ltd.?
c) Matched the third quarter of 2019
d) Was lower than the third quarter of 2019 a) HDFC Ltd.
b) HDFC Bank
Answer: b) Surpassed the third quarter of 2019 by c) Larsen & Toubro Ltd.
more than twice the amount d) The Securities and Exchange Board of India (SEBI)
17. What merger was the driving force behind the Answer: c) Larsen & Toubro Ltd.
spike in mergers and acquisitions activity in India in
April? 21. In everyday conversation, what phrases are
frequently used synonymously with each other?
a) HDFC Bank with HDFC Ltd.
b) Mindtree Ltd. with Larsen & Toubro InfoTech Ltd. a) Mergers and acquisitions
c) Euro Zone crisis b) Amalgamations and takeovers
d) International investors' movement c) Acquisitions and takeovers
d) Mergers, acquisitions, and takeovers
Answer: a) HDFC Ltd. with HDFC Bank
Answer: d) Mergers, acquisitions, and takeovers
18. What was the transaction value of the HDFC Ltd.
merger with HDFC Bank?
a) $13 billion
b) $3 1 billion
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22. How is acquisition defined in the context of the Answer: c) The Securities and Exchange Board of
text? India (SEBI)
a) The combination of two separate entities into
26. According to Halsburry’s Laws of England, how is
one
an amalgamation described?
b) The process of buying out another entity and
absorbing it
a) The combination of two or more pre-existing
c) Amalgamation of firms within the limits of the
businesses, with the shareholders of each
Companies Act
amalgamating
d) Overseen by the Securities and Exchange Board
b) The process of buying out another entity and
of India (SEBI)
absorbing it
Answer: b) The process of buying out another c) A cross-border transaction
entity and absorbing it d) A takeover governed by the Companies Act
23. In the context of Indian law, what term is more Answer: a) The combination of two or more pre-
accurately rendered as "amalgamation"? existing businesses, with the shareholders of each
amalgamating
a) Takeover
b) Merger 27. What term is used when two or more
c) Acquisition businesses come together, with one becoming
d) Cross-border transaction largely the shareholders in the amalgamating
company?
Answer: b) Merger
a) Amalgamation
24. What governs mergers and acquisitions (M&A) b) Takeover
deals according to the text? c) Merger
d) Consolidation
a) International tax considerations
b) The Securities and Exchange Board of India (SEBI) Answer: c) Merger
c) The Companies Act
d) Halsburry’s Laws of England 28. How is the process referred to when two or
Answer: c) The Companies Act more businesses combine into a single entity, one
business merges with another, or one business is
25. What oversees takeovers in India, as mentioned acquired by another?
in the text?
a) Amalgamation
a) International tax considerations b) Takeover
b) Halsburry’s Laws of England c) Merger
c) The Securities and Exchange Board of India (SEBI) d) Consolidation
d) The Companies Act
Answer: a) Amalgamation
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29. In the case of Inland Steam Navigation Workers 32. When does a merger result in absorption?
Union vs. R.S. Navigation Company Ltd., what a) When both companies continue operating
happens to the rights and liabilities of one company independently
in the event of an amalgamation? b) Legal dissolution of only one of the corporations
involved
a) They remain unchanged c) When one company dissolves the other
b) They are dissolved d) Consolidation of two companies
c) They are transferred to the transferee company
d) They are shared between the two companies Answer: b) Legal dissolution of only one of the
corporations involved
Answer: c) They are merged into those of another
company, making the transferee company vested 33. Who is credited with initiating the practice of
with all of the rights and liabilities corporate takeovers in India by attempting to
acquire Escorts?
30. When does a takeover occur, according to the
information provided? a) Hindujas
b) Lord Swaraj Paul
a) When one company dissolves the other c) Chabbrie Group
b) When both companies continue operating d) Goenka family
independently after the deal
c) When one company absorbs the other Answer: b) Lord Swaraj Paul
d) When both companies merge into a new entity
34. What significant takeover is mentioned
Answer: b) When both companies continue involving Hindujas in the text?
operating independently after the deal
a) Acquisition of Dunlop and Falcon Tyres
31. What does it mean if the acquisition results in b) Purchase of Ceat Tyres by the Goenka family
consolidation? c) Shaw Wallace's purchase of Ashok Leyland
d) Tata Tea's purchase of Consolidated Coffee
a) Legal dissolution of both companies and the
creation of a new company Answer: c) Shaw Wallace's purchase of Ashok
b) Both companies continue operating Leyland
independently
c) Merger of two companies
d) Dissolution of only one of the corporations
involved
Answer: a) Legal dissolution of both companies

and the creation of a new company
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35. Which board was responsible for coordinating b) Dunlop

the acquisition of smaller businesses by industry c) McDowell
titans such as ITC, McDowell, Lakshmi Machine d) Tata Tea
Works, and the Somali Group?
Answer: c) McDowell
a) Board for Industrial and Financial Reconstruction
(BIFR) 39. In the context of mergers and acquisitions, why
b) Board of Directors is it imperative to have support, as mentioned in
c) Globalization Board the text?
d) Takeover Coordination Board
a) To increase government control
Answer: a) Board for Industrial and Financial b) To promote industry and trade
Reconstruction (BIFR) c) To reduce shareholder interests
d) To limit corporate debt restructuring
36. What is mentioned as the primary economic
activity in the nation undergoing rapid Answer: b) To promote industry and trade
industrialization?
40. What is the government responsible for in the
a) Technology context of mergers and acquisitions, according to
b) Agriculture the text?
c) Services
d) Tourism a) Promoting industry and trade
b) Protecting the interests of shareholders,
Answer: b) Agriculture creditors, investors, and employees/workers
c) Restricting corporate debt restructuring
37. What new tendencies have been observed due d) Facilitating cross-border mergers
to globalization, according to the text?
Answer: b) Protecting the interests of
a) Decline in business interactions shareholders, creditors, investors, and
b) Isolation of businesses from other countries employees/workers
c) Rise in the establishment of new businesses
d) Decrease in economic activities 41. In which chapter of the Companies Act, 2013,
are the provisions on "Compromises,
Answer: c) Rise in the establishment of new Arrangements, and Amalgamations" found?
businesses
a) Chapter X
38. Besides Lord Swaraj Paul, name another entity b) Chapter XV
mentioned in the text involved in a significant c) Chapter V
takeover. d) Chapter III
a) Escorts Answer: b) Chapter XV

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42. What do the provisions in Chapter XV of the Answer: d) Depending on the circumstances
Companies Act, 2013, cover?
45. What is a common definition of a merger?
a) Corporate debt restructuring only
b) Cross-border mergers only a) The dissolution of a business to construct another
c) Mergers for small companies/holding subsidiary b) The separation of two businesses into
companies only independent entities
d) Corporate debt restructuring, demergers, fast c) The combination of two separate businesses into
track mergers, cross-border mergers, takeovers, one
amalgamation of companies in public interest, and d) The absorption of a corporation by a
more proprietorship
Answer: d) Corporate debt restructuring, Answer: c) The combination of two separate

demergers, fast track mergers, cross-border businesses into one
mergers, takeovers, amalgamation of companies in
public interest, and more 46. How is the phrase "merger" ?
43. Besides the Companies Act, 2013, what other a) The process of constructing businesses through
Acts govern or control mergers and acquisitions, absorption
according to the text? b) The process of dissolving multiple businesses to
create another
a) The Competition Act of 2002 only c) The separation of two corporations
b) The SEBI Act of 1992 only d) The establishment of a monopoly in the market
c) The Foreign Exchange Management Act of 1999,
the Income Tax Act of 1961, the Industries Answer: b) The process of dissolving one or more
(Development and Regulation) Act of 1951, the businesses, corporations, or proprietorships to
Competition Act of 2002, and other relevant Acts construct another
d) The Income Tax Act of 1961 only
47. What happens to the combined business after a
Answer: c) The Foreign Exchange Management Act merger?
of 1999, the Income Tax Act of 1961, the Industries
(Development and Regulation) Act of 1951, the a) It becomes significantly smaller
Competition Act of 2002, and other relevant Acts b) It remains the same size
c) It becomes significantly larger
44. What circumstances determine the restrictions d) It dissolves into smaller entities
imposed by Acts such as the SEBI Act of 1992?
Answer: c) It becomes significantly larger
a) Corporate debt restructuring
b) Cross-border mergers
c) Industry and trade promotion
d) Depending on the circumstances
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48. What is a characteristic of a Horizontal Merger? 51. What characterizes mergers between
conglomerates?
a) The merged businesses operate in different a) Both companies produce the same or rival
market sectors products
b) The newly consolidated company will likely have b) Their lines of business are completely
a smaller market share unconnected
c) The merged businesses operate in the same c) The acquirer and target have a buyer-seller
market sector relationship
d) The goal is to create more competition in the d) Their commercial endeavors are tied in both
market horizontal and vertical senses
Answer: c) The merged businesses operate in the Answer: b) Their lines of business are completely
same market sector unconnected
49. What is a Vertical Merger? 52. In conglomerate mergers, what does it mean
when it is mentioned that the acquirer and target
a) A merger between unrelated businesses do not produce the same or rival products?
b) A merger involving the dissolution of businesses
c) A merger between businesses in different market a) They have no commercial endeavors
sectors b) Their products are complementary
d) A merger between organizations with a "buyer- c) Their businesses are unrelated
seller" relationship d) They have a buyer-seller relationship
Answer: d) A merger between organizations that Answer: c) Their businesses are unrelated
have a "buyer-seller" relationship
53. What are the primary goals of any merger,?
50. What is the potential outcome of a Horizontal
Merger? a) Expansion of debt capacity only
b) Integration of managerial activities only
a) Increased competition in the market c) Consolidation of different types of enterprises
b) The elimination of competition and a move only
towards monopoly d) Utilization of financial resources, expansion of
c) The creation of smaller market shares debt capacity, and integration of managerial
d) The establishment of independent entities activities
Answer: b) The elimination of competition and a Answer: d) Utilization of financial resources,

move towards monopoly expansion of debt capacity, and integration of
managerial activities
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54. What characterizes a Congener Merger? 57. Why does a smaller, unlisted company opt for a
reverse merger?
a) Both companies produce the same products
b) Both companies have a buyer-seller relationship a) To avoid the acquisition of shares
c) The acquiring and merged companies are b) To avoid issuing shares to the public through an
connected in some way Initial Public Offering
d) The acquiring and merged companies have c) To undergo a lengthy and complicated process
unrelated business segments d) To dissolve its existing business environment
Answer: c) The acquiring company and the Answer: b) To avoid issuing shares to the public
company it is merging with are connected in some through an Initial Public Offering
way
58. What does the term "Acquisition" refer ?
55. How does the acquirer benefit in a Congener
Merger, as mentioned in the text? a) The purchase of fresh shares through a
confidential agreement
a) Expansion of product range, market participation, b) The consolidation of similar business activities
or technological capabilities within the industry
b) Decrease in debt capacity c) The purchase of a controlling interest in the share
c) Dissolution of managerial activities capital of an existing firm by one corporation from
d) Reduction of financial resources another
d) The acquisition of shares through the open
Answer: a) Expansion of product range, market market (open offer)
participation, or technological capabilities
Answer: c) The purchase of a controlling interest in
the share capital of an existing firm by one
56. What does the term "Reverse Merger" refer to, corporation from another
as mentioned in the text?
a) A smaller, unlisted company acquires a larger, 59. What is the term used when an acquiring
publicly listed company company combines both businesses into a single
b) A larger, publicly listed company acquires a entity and operates as a single entity?
smaller, unlisted company
c) A merger that involves the consolidation of a) Merger
similar business activities b) Slump sale
d) A merger that results in the dissolution of the c) Acquisition
acquirer's existing business environment d) Reverse merger
Answer: a) A smaller, unlisted company acquires a Answer: a) Merger

larger, publicly listed company
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60. How can an acquisition happen, as mentioned in b) The sale completed for a single sum of money
the text? without specific valuations assigned to asset
categories
a) Only through an arrangement with the person c) The acquisition of a portion of a company's share
who holds the majority of the interest capital
b) Only through the acquisition of fresh shares d) Making an offer to buy out the general body of
through a confidential agreement shareholders
c) Through an arrangement with the person who
holds the majority of the interest, the acquisition of Answer: b) The sale completed for a single sum of
fresh shares through a confidential agreement, and money without specific valuations assigned to asset
the acquisition of shares through the open market categories
(open offer)
d) Only through the acquisition of shares through 63. what happens when one company acquires
the open market (open offer) another in a slump sale?
Answer: c) Through an arrangement with the a) Capital gains are subject to income tax
person who holds the majority of the interest, the b) The acquired company retains its identity
acquisition of fresh shares through a confidential c) It is completed for a single sum of money
agreement, and the acquisition of shares through d) It is not done in a cordial manner
the open market (open offer)
Answer: c) It is completed for a single sum of
money
61. what does it mean when a firm is "acquired"?
64. How is a "merger" distinguished from an
a) It has been bought out by another corporation, "acquisition" in the context of the text?
and it typically loses its identity
b) It has merged with another firm on an equal a) A merger refers to the acquisition of a portion of
footing a company's share capital
c) It has undergone a slump sale b) In an acquisition, both companies operate as a
d) It has made an offer to buy out the general body single entity
of shareholders c) In a merger, two separate businesses come
together on an equal footing
Answer: a) It has been bought out by another d) An acquisition refers to the coming together of
corporation, and it typically loses its identity two separate businesses on an equal footing
62. What does the term "slump sale" refer to in the Answer: c) In a merger, two separate businesses
context of the text? come together on an equal footing
a) The sale of a company in a cordial manner

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65. What does the term "Takeover" typically d) By offering to buy out the general body of
involve? shareholders in INDAL
a) Purchasing a division or plant from another Answer: b) By purchasing a 54% stake in the
company company from its equity capital
b) Acquiring a specified interest in the equity capital
of a company to exert control 68. What is the key distinction mentioned between
c) Buying out the general body of shareholders in the purchase of a division or plant and a takeover in
the company the context of the text?
d) Merging two separate businesses on an equal
footing a) The amount of monetary payment involved
b) The level of control exerted by the acquiring
Answer: b) Acquiring a specified interest in the company
equity capital of a company to exert control c) The percentage of equity capital acquired
d) The type of assets and liabilities taken over
66. How is the acquisition of a division or factory
typically conducted? Answer: b) The level of control exerted by the
acquiring company
a) The acquiring company assumes responsibility for
the division's liabilities and makes a monetary
payment 69. . What is the primary distinction between a
b) The acquiring company merges with the selling takeover and a merger or the purchase of an
company existing division, as stated in the text?
c) The acquiring company purchases the entire
company along with its assets and liabilities a) The level of control exerted by the acquiring
d) The acquiring company only makes a monetary company
payment without assuming any liabilities b) The consent of the shareholders of the target
company
Answer: a) The acquiring company assumes c) The transfer of assets and obligations
responsibility for the division's liabilities and makes d) The percentage of equity capital acquired
a monetary payment
Answer: c) The transfer of assets and obligations
67. In the example provided, how did HINDALCO
acquire control of INDAL in the context of a
takeover?
a) By purchasing a division or factory from INDAL

b) By acquiring a specified interest in INDAL's equity
capital
c) By merging with INDAL in a cordial manner
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70. When is the term "takeover" generally used? 73. What is a partial selloff in the context of
divestitures?
a) When the transaction involves loan financing
b) When the transaction is accomplished amicably a) When one company sells its entire operations to
with the consent of the majority shareholders another company.
c) When the transaction is accomplished without b) When one company sells a portion of its
the consent of the shareholders and is hostile operations, such as a facility or a business division,
d) When the transaction involves divestitures to another company.
c) When a company acquires additional operations
Answer: c) When the transaction is accomplished from another company.
without the consent of the shareholders and is d) When one company merges with another
hostile company.
71. What term is used to refer to a takeover or the Answer: b) When one company sells a portion of
purchase of a division when it is mostly its operations, such as a facility or a business
accomplished with the assistance of loan financing? division, to another company.
a) Acquisition 74. What is the key characteristic of a sale of equity

b) Divestiture stake in divestitures?
c) Hostile takeover
d) Leveraged Buyout a) It involves the sale of an entire business division.
b) It is a demerger process.
Answer: d) Leveraged Buyout c) It represents the transfer of ownership of a
controlling block in the company.
72. How do acquisitions and divestitures differ in d) It results in a partial selloff.
terms of control and asset base?
Answer: c) It represents the transfer of ownership
a) Acquisitions result in a smaller asset base and a of a controlling block in the company.
loss of control, while divestitures lead to an
increase in control and a larger asset base 75. What is the term used to describe the process
b) Both acquisitions and divestitures result in an when a company splits off its offshore operations to
increase in control and a larger asset base create a new entity?
c) Acquisitions lead to an increase in control and a
larger asset base, while divestitures result in a a) Merger
smaller asset base and a loss of control b) Acquisition
d) Both acquisitions and divestitures result in a c) Demerger
smaller asset base and a loss of control d) Privatization
Answer: c) Acquisitions lead to an increase in Answer: c) Demerger

control and a larger asset base, while divestitures
result in a smaller asset base and a loss of control
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76. How is a demerger defined in the context of d) The complete transfer of ownership of a state-
divestitures? owned business to private entities
a) It is the sale of equity stake from one investor to Answer: d) The complete transfer of ownership of
another. a state-owned business to private entities
b) It is when a company sells a portion of its
operations to another company. 80. Who might acquire ownership stakes in
c) It involves the transfer of one or more business previously state-owned businesses during PSU
divisions to another company being formed disinvestment?
simultaneously. a) Government agencies
d) It is a process where a company acquires b) Competing state-owned businesses
additional business divisions. c) General investing public
d) Employees of the state-owned business
Answer: c) It involves the transfer of one or more
business divisions to another company being Answer: c) General investing public
formed simultaneously.
81. What is the key concept behind synergistic
77. In the context of equity carve-out, what does a operating economics in the context of mergers and
parent company sell? acquisitions (M&A)?
a) Its entire ownership stake in a subsidiary a) V (AB) < V (A) + V (B)
b) A portion of its ownership stake in a subsidiary b) V (AB) = V (A) - V (B)
c) The subsidiary's assets c) V (AB) > V (A) + V (B)
d) The subsidiary's liabilities d) V (AB) = V (A) + V (B)
Answer: b) A portion of its ownership stake in a
subsidiary Answer: c) V (AB) > V (A) + V (B)
78. What is the resulting company called in the 82. How does Mark L. Sorrowed define synergy in
equity carve-out process? the context of mergers and acquisitions?
a) Parent company a) The decrease in performance of the combined
b) Subsidiary company firm
c) Carved-out company b) The maintenance of individual firm values
d) Resultant company c) The increase in performance of the combined
Answer: c) Carved-out company firm beyond what the two firms are expected to
achieve independently
79. In the context of PSU disinvestment, what is d) The balancing of resources between two
privatization? companies
a) The process of acquiring state-owned businesses
b) The process of merging public and private Answer: c) The increase in performance of the
companies combined firm beyond what the two firms are
c) The sale of a company's assets expected to achieve independently
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83. According to Mark L. Sorrowed, what is the 86. Why do amalgamated enterprises tend to have
result of synergy in a merged firm? a higher productivity level than their respective
a) Decrease in performance predecessors?
b) Maintenance of current performance levels a) Reduction in synergy benefits
c) Increase in performance beyond individual b) Increase in average cost of production
expectations c) Lower productivity due to larger scale
d) Stagnation in performance d) Benefits of synergy and economics of huge scale
leading to lower average cost of production
Answer: c) Increase in performance beyond
individual expectations Answer: d) Benefits of synergy and economics of
huge scale leading to lower average cost of
84. What can be a source of synergy in mergers and production
acquisitions?
a) Maintaining separate services 87. How does production on a larger scale
b) Reducing the scale of operations contribute to lower average production costs in a
c) Complementary services, economies of scale, or merger?
both a) It increases overhead costs
d) Independent production systems b) It results in a higher average cost of production
c) It reduces average production costs
Answer: c) Complementary services, economies of d) It has no impact on production costs
scale, or both
Answer: c) It reduces average production costs
85. Which of the following is an example of
complementary activities that can lead to synergy in 88. Which of the following is an example of a cost
mergers? reduction brought about by the sharing of central
a) Both companies having similar production services in a merger?
systems a) Increase in overhead costs
b) One company having an effective production b) Independent management structures
system, and another having an effective networking c) Reduction in advertising expenses
of branches d) Separate accounting and finance departments
c) Maintaining independent networks without
integration Answer: c) Reduction in advertising expenses
d) Combining identical services
Answer: b) One company having an effective

production system, and another having an effective
networking of branches
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89. What is a compelling argument for merger and Answer: a) Reduction in "Time to Market"
acquisition in terms of taxation?
a) Increase in tax liabilities 93. How does the consolidation of production
b) Loss of tax savings capabilities contribute to enhanced market power
c) Provisions in the Income Tax Act allowing for in mergers?
losses to be offset against other income or carried a) By increasing the total number of competitors
forward b) By decreasing marketing power
d) Exemption from taxation for merged entities c) By reducing output capacity
d) By decreasing the total number of competitors
Answer: c) Provisions in the Income Tax Act and boosting output capacity
allowing for losses to be offset against other income
or carried forward Answer: d) By decreasing the total number of
competitors and boosting output capacity
90. In the context of taxation, what benefit does the
amalgamated company receive as a result of the 94. What is a potential outcome of the decrease in
merger? the total number of competitors in a merger?
a) Increase in tax liabilities a) Reduction in marketing power
b) Tax exemptions for the target business b) Increase in marketing power
c) Tax savings and a reduction in tax liabilities c) No impact on marketing power
d) No impact on tax status d) Increase in competition
Answer: c) Tax savings and a reduction in tax Answer: b) Increase in marketing power
liabilities
95. How do economies of scale contribute to cost
91. Why might a company choose mergers and savings in mergers?
acquisitions for growth over organic growth? a) By increasing production costs
a) Slower growth rate b) By reducing production capabilities
b) Faster growth rate c) By decreasing distribution efficiency
c) Equal growth opportunities d) By more intensive utilization of manufacturing
d) Limited growth potential capabilities in a combined entity
Answer: d) By more intensive utilization of
Answer: b) Faster growth rate manufacturing capabilities in a combined entity
92. What is the driving force behind choosing 96. In the context of mergers, which type of merger
mergers and acquisitions for growth, as mentioned involves companies that sell similar products?
in the passage? a) Conglomerate merger
a) Reduction in "Time to Market" b) Vertical merger
b) Increase in production costs c) Horizontal merger
c) Establishment of independent plants d) Network merger
d) Delays in hiring people
Answer: c) Horizontal merger
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97. What is a characteristic of horizontal mergers Answer: c) When the scope of operations and the
that makes economies of scale most obvious and size of the organization become excessively large
evident? and unmanageable
a) Intensive resource utilization
b) Decreased market power 101. What is the concept of economies of scope in
c) Increased competition the context of mergers?
d) Independent operations a) Narrowing the range of activities
b) Broadening the range of activities using existing
Answer: a) Intensive resource utilization capabilities or assets
c) Increasing competition
98. What is a significant benefit of vertical mergers? d) Reducing coordination and control
a) Increased competition
b) Decreased market power Answer: b) Broadening the range of activities using
c) Greater activity coordination, decreased existing capabilities or assets
inventory levels, and increased market power
d) Reduced efficiency in resource utilization 102. How can Proctor and Gamble (P&G) benefit
from economies of scope in a merger?
Answer: c) Greater activity coordination, a) By reducing marketing expertise
decreased inventory levels, and increased market b) By narrowing the range of activities
power c) By purchasing assets from another company
d) By using their well-respected consumer
99. How can conglomerate mergers potentially lead marketing expertise in a consumer product firm
to cost reduction?
a) By increasing overhead expenses Answer: d) By using their well-respected consumer
b) By maintaining independent operations marketing expertise in a consumer product firm
c) By eliminating some overhead expenses
d) By minimizing market power 103. How does vertical integration contribute to
cost savings in mergers?
Answer: c) By eliminating some overhead a) By increasing competition
expenses b) By reducing coordination and control
c) By combining resources of enterprises operating
100. Under what circumstances can economies of at various stages of a value chain or production
scale work against a merged entity? process
a) When operations are too small d) By limiting the range of activities
b) When organizations are well-managed
c) When the scope of operations and the size of the Answer: c) By combining resources of enterprises
organization become excessively large and operating at various stages of a value chain or
unmanageable production process
d) When overhead expenses are reduced
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104. In the context of vertical integration, what b) When the company prefers to keep surplus funds
benefits can be achieved by merging operations in without investment
oil exploration and production with oil refining and c) When the company has limited cash reserves
marketing? d) When the company lacks options for making
a) Increased competition lucrative investments
b) Decreased coordination and control
c) Cost savings, coordination, and control Answer: d) When the company lacks options for
d) Independent operations making lucrative investments
Answer: c) Cost savings, coordination, and control 108. What actions might a company in an
established market consider if it has surplus funds?
105. When might a merger make sense for two a) Making more investments
companies based on the concept of complementary b) Reducing dividends and share repurchases
resources? c) Paying out significant dividends and purchasing
a) When the companies are direct competitors back shares
b) When the companies have overlapping resources d) Keeping surplus funds without any action
c) When the resources of the companies are
complementary to each other Answer: c) Paying out significant dividends and
d) When the companies have similar engineering purchasing back shares
capabilities
109. What is a common tendency of management
Answer: c) When the resources of the companies teams in companies with surplus funds, according
are complementary to each other to the passage?
a) Making fewer investments
b) Making more investments, even if they are not
106. How does the value of two companies increase lucrative
when they merge and work together on a unique c) Returning surplus funds to shareholders
product? immediately
a) The value remains the same d) Avoiding mergers and acquisitions
b) The value decreases
c) The value increases due to complimentary Answer: b) Making more investments, even if they
resources are not lucrative
d) The value increases due to increased competition
Answer: c) The value increases due to

complimentary resources
107. In what situation might a merger be beneficial

for a company operating in an established market
with surplus funds?
a) When the company is facing financial difficulties
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110. In what circumstances might a merger be seen c) Isolation from other industries
as a more effective utilization of surplus capital? d) Avoidance of efficiency improvement
a) When there are plenty of options for lucrative
investments Answer: a) Excessive number of players and
b) When a company lacks surplus funds surplus capacities
c) When cash compensation is involved in the
merger 114. In which situations is consolidation required
d) When management teams prefer to keep surplus for boosting efficiency in various industries?
funds without investment a) When there is a shortage of players
b) When there is no surplus capacity
Answer: c) When cash compensation is involved in c) When there is limited competition
the merger d) When there are an excessive number of players
and surplus capacities
111. What potential benefit could result from a
merger in terms of managerial effectiveness? Answer: d) When there are an excessive number
a) Decrease in management efficiency of players and surplus capacities
b) Maintenance of current management team
c) Increase in management efficiency by replacing 115. Which industries are mentioned in the passage
an ineffective management team as examples where consolidation has been
d) No impact on managerial effectiveness necessary?
a) Information technology and hospitality
Answer: c) Increase in management efficiency by b) Pharmaceuticals and steel
replacing an ineffective management team c) Banking and telecommunications
d) Agriculture and textiles
112. When might a company benefit enormously Answer: c) Banking and telecommunications
from a merger in terms of managerial
effectiveness? 116. What are some dubious reasons for mergers,
a) When the current management team is as mentioned in the passage?
performing well a) Achieving efficiency and enhancing market power
b) When the current management team is not doing b) Diversification, cheaper cost of financing, and
well achieving a greater rate of earnings growth
c) When the company has surplus capacities c) Consolidation and industry synergy
d) When there is no need for consolidation d) Managerial effectiveness and utilization of
Answer: b) When the current management team is surplus funds
not doing well
Answer: b) Diversification, cheaper cost of
113. What is a key factor driving mergers in the financing, and achieving a greater rate of earnings
context of industry consolidation? growth
a) Excessive number of players and surplus
capacities
b) Limited competition and resources
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117. Why does the passage suggest that the desire

to diversify, achieve a cheaper cost of financing, and 121. What is the anticipated result regarding the
achieve a greater rate of earnings growth might be creation of new value in the mentioned merger?
dubious? a) Anticipated increase in value
a) Because these goals are not common in business b) Anticipated decrease in value
b) Because they are likely to increase value c) No change in value
c) Because they are worthy goals d) Anticipated creation of new value
d) Because it is highly unlikely that they will increase
value Answer: c) No change in value
Answer: d) Because it is highly unlikely that they 122. What does the exchange ratio of 1:2 mean in
will increase value the context of the merger?
a) One share of A Limited will be transferred in
118. What impression might a merger give exchange for two shares of B Limited
regarding earnings growth? b) Two shares of A Limited will be transferred in
a) Decrease in earnings exchange for one share of B Limited
b) No change in earnings c) Equal exchange of shares between A Limited and
c) Misleading impression of earnings growth B Limited
d) Significant decrease in earnings d) The merger will not involve any share exchange
Answer: c) Misleading impression of earnings Answer: a) One share of A Limited will be

growth transferred in exchange for two shares of B Limited
119. What potential result could arise if investors 123. Why does the price-earnings ratio for A Limited
are misled about earnings growth in a merger? decrease after the merger, even when earnings per
a) Decrease in stock price share go up?
b) No change in stock price a) Because the market becomes more optimistic
c) Increase in stock price b) Because the market realizes the growth
d) No impact on earnings prospects of the combined company are not as
Answer: c) Increase in stock price bright as those of A Limited alone
c) Because the market becomes more efficient
120. In the example provided in the passage, what d) Because the market values the combined firm
is the price-earnings ratio for A Limited before the more than the individual companies
merger?
a) 10 Answer: b) Because the market realizes the growth
b) 20 prospects of the combined company are not as
c) 30 bright as those of A Limited alone
d) Not provided in the passage
Answer: b) 20
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124. What is the impact on the price of one share of

A Limited in the market after the merger? 128. What is the price-earnings ratio for A Limited
a) Increase in price after the merger, assuming the market is "smart"?
b) Decrease in price a) 20
c) Stability at sixty yen b) 10
d) Doubling in price c) 15
d) 25
Answer: c) Stability at sixty yen
Answer: a) 20
125. How is the market value of the combined firm
calculated after the merger? 129. How does the total value of A Limited change
a) By subtracting the market values of the two after the merger, assuming the market becomes
merged companies "smart" and recognizes genuine growth?
b) By adding the market values of the two merged a) Decreases from Rs. 6 crores to Rs. 3 crores
companies b) Increases from Rs. 3 crores to Rs. 9 crores
c) By multiplying the market values of the two c) Increases from Rs. 9 crores to Rs. 12 crores
merged companies d) Decreases from Rs. 12 crores to Rs. 9 crores
d) By dividing the market values of the two merged
companies Answer: c) Increases from Rs. 9 crores to Rs. 12
crores
Answer: b) By adding the market values of the two
companies that merged to form the combined 130. What may a market susceptible to the allure of
company earnings growth be described as?
126. What is the market price per share of A Limited A) Efficient

after the merger, considering increased earnings B) Inefficient
per share and a steady price-earnings ratio? C) Stable
a) Rs. 60 D) Dynamic
b) Rs. 30
c) Rs. 80 Answer: B) Inefficient
d) Rs. 90
Answer: c) Rs. 80 131. According to the passage, what could happen
in a market that is inefficient?
127. What is the overall market worth after the
market becomes "smart" and recognizes the A) Illusion of earnings growth
genuine growth reflected in earnings per share? B) Stable profits
a) Rs. 6 crores C) Optimal efficiency
b) Rs. 9 crores D) False profits vanish
c) Rs. 12 crores
d) Rs. 15 crores Answer: A) Illusion of earnings growth
Answer: c) Rs. 12 crores
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132. What is predicted to happen to false profits in

an inefficient market? Answer: C) A parent company created to control
other companies
A) They persist indefinitely
B) They vanish once optimal efficiency is reached 136. What does the term "earn-out" refer to in the
C) They contribute to market stability context of business acquisitions?
D) They grow exponentially
A) Future compensation for the buyer
Answer: B) They vanish once optimal efficiency is B) Future compensation for the seller based on
reached financial goals
C) Initial payment made during the acquisition
133. What is an acquisition vehicle? D) Legal framework for managing combined
businesses
A) A legal structure created to acquire the target
firm Answer: B) Future compensation for the seller
B) The target firm itself based on financial goals
C) The post-closing organization
D) The holding company 137. What is the process through which a deal
generates value for all parties involved in Mergers
Answer: A) A legal structure created to acquire the and Acquisitions (M&A) transactions called?
target firm
A) Acquisition
B) Deal structuring
134. What is the post-closing organization? C) Post-closing organization
D) Holding company formation
A) The holding company
B) The target firm Answer: B) Deal structuring
C) The organization managing combined businesses
after the transaction 138. What does a well-structured M&A deal take
D) The subsidiary company into account?
Answer: C) The organization managing combined A) Short-term risks only

businesses after the transaction B) Unforeseen risks only
C) Issues several years into the future and
135. What is a holding company? unforeseen risks
D) Only financial aspects
A) The target firm
B) The post-closing organization Answer: C) Issues several years into the future and
C) A parent company created to control other unforeseen risks
companies
D) The acquisition vehicle
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139. Why are deal structure and financing closely C) Acquisition vehicle, post-closing organization,
interwoven? form of acquisition, form of payment, and legal
form of the selling entity
A) To complicate the negotiation process D) Only the form of payment
B) To establish a consensus throughout the deal-
structuring process Answer: C) Acquisition vehicle, post-closing
C) To reduce the complexity of the deal organization, form of acquisition, form of payment,
D) To prioritize financial aspects over deal structure and legal form of the selling entity
Answer: B) To establish a consensus throughout 143. What will be presented in addition to the
the deal-structuring process discussion of tax issues?
140. What does the deal-structuring and A) Negotiation strategies

negotiation process result in? B) Legislative challenges
C) Financial analysis techniques
A) Acquirer and target firms merging D) Corporate tax inversions
B) An agreement or deal structure between the
acquirer and target firms Answer: A) Negotiation strategies
C) A financial assessment of the deal
D) A breakdown in negotiations 144. Why are tax issues considered extremely
crucial in M&A transactions?
Answer: B) An agreement or deal structure
between the acquirer and target firms A) They have no impact on agreement-making
B) They can affect agreement-making due to
141. What is a highly leveraged transaction? different taxable and non-taxable structures
C) They only impact private equity firms
A) A stock market transaction D) They are irrelevant to corporate tax inversions
B) A transaction with minimal debt
C) A bank loan to a company with a large amount of Answer: B) They can affect agreement-making due
debt to different taxable and non-taxable structures
D) A government-backed transaction
145. What is the focus of negotiations in the
Answer: C) A bank loan to a company with a large context of M&A transactions?
amount of debt
A) Tax issues
142. What are the major aspects of the deal- B) Financial analysis
structuring procedure m? C) Deal structure
D) Legislative challenges
A) Only the acquisition vehicle
B) Only the post-closing organization Answer: C) Deal structure
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146. When is it time to start thinking about how to Answer: B) Distributing risk between the acquirer
properly structure the deal in the M&A process? and the target
A) Before choosing a target firm 150. What is the optimal structure for a business
B) After the initial financial analysis transaction?
C) Before deciding on acquisition as the strategy
D) After management decides on acquisition A) One that eliminates all risks
B) One that achieves only the basic goals of the
Answer: D) After management decides on acquirer
acquisition C) One that achieves the basic goals of all parties
involved while outlining their rights and
147. What is an agreement between the acquirer responsibilities
and target firms specifying their rights and D) One that prioritizes the target's goals over the
obligations known as? acquirer's
A) Corporate tax inversion Answer: C) One that achieves the basic goals of all
B) Negotiation strategy parties involved while outlining their rights and
C) Financial analysis responsibilities
D) Deal structure
151. Why might the deal structuring process be
Answer: D) Deal structure exceptionally difficult?
148. What does the process of deal structuring aim A) Due to a lack of parties involved
to achieve? B) Because it involves various parties, approvals,
types of payment, and sources of financing
A) Maximizing liabilities C) Because it eliminates all risks
B) Distributing risk and achieving major objectives D) Because it focuses only on liabilities
C) Eliminating all risk
D) Ignoring the goals of the acquirer and the target Answer: B) Because it involves various parties,
approvals, types of payment, and sources of
Answer: B) Distributing risk and achieving major financing
objectives
152. How is the process of containing the risk in a
149. What is risk sharing in the context of deal complicated transaction ?
structuring? A) To a straightforward negotiation
B) To squeezing one end of a water balloon
A) Transferring all risks to the acquirer C) To eliminating all risks
B) Distributing risk between the acquirer and the D) To transferring all liabilities to the target
target
C) Ignoring the concept of risk Answer: B) To squeezing one end of a water
D) Eliminating all risks involved in the transaction balloon
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153. What is considered the method of payment in 156. What elements need to be considered when
an acquisition? deciding on an acquisition vehicle or post-closing
organization?
A) Cash only
B) Common stock only A) Cost and level of formality only
C) Debt only B) Ownership transfer ease only
D) Combination of cash, common stock, or debt C) Continuous existence only
D) Cost and level of formality, ownership transfer
Answer: D) Combination of cash, common stock, ease, continuous existence, management control,
or debt and convenience of obtaining financial support
154. How might the payout in an acquisition be Answer: D) Cost and level of formality, ownership
structured? transfer ease, continuous existence, management
control, and convenience of obtaining financial
A) One-time lump sum only support
B) Tied to the target's past performance only
C) Tied to the target's future performance, one-time 157. Which of the following is not mentioned as a
lump sum, or paid out over an extended period possible form of payment in an acquisition?
D) Paid out over an extended period only
A) Cash
Answer: C) Tied to the target's future B) Common stock
performance, one-time lump sum, or paid out over C) Debt
an extended period D) Real estate
Answer: D) Real estate

155. What does the form of acquisition reflect?
A) Only the nature of the thing being bought 158. What factors must be considered when
B) Only the manner in which ownership is deciding on an acquisition vehicle or post-closing
transferred organization?
C) Both the nature of the thing being bought and
the manner in which ownership is transferred A) Risk, financing, taxation, and control
D) Neither the nature nor the manner of acquisition B) Cost and level of formality only
C) Continuous existence and management control
Answer: C) Both the nature of the thing being only
bought and the manner in which ownership is D) Ownership transfer ease and continuous
transferred existence only
Answer: A) Risk, financing, taxation, and control

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159. What is one of the attributes that the

acquisition vehicle provides to buyers? A) Sole proprietorship
B) Partnership
A) Limited liability only C) Limited liability company (LLC)
B) Continuity of ownership only D) Acquisition vehicle
C) Flexible financing only
D) Limited liability, flexible financing, continuity of Answer: D) Acquisition vehicle
ownership, and transaction flexibility
163. Can the post-closing organization be the same
Answer: D) Limited liability, flexible financing, as the one selected for the acquisition vehicle?
continuity of ownership, and transaction flexibility
A) No, they must always be different
160. How can selecting the right organization B) Yes, they can be identical
impact the acquisition? C) Only if the acquisition vehicle is a holding
company
A) It has no impact on potential risks D) Only if the acquisition vehicle is a partnership
B) It increases the total amount spent on the
acquisition Answer: B) Yes, they can be identical
C) It reduces the impact of potential risks, increases
financing options, and reduces the total amount 164. What are holding companies usually
spent on the acquisition characterized by?
D) It limits the scope of available financing options
A) A distinct organizational and management style
Answer: C) It reduces the impact of potential risks, B) A lack of organizational structure
increases financing options, and reduces the total C) Frequent changes in management
amount spent on the acquisition D) Lack of clear goals
161. What is mentioned as an easy way for small Answer: A) A distinct organizational and
privately held businesses to transfer owner's equity management style
to employees with significant tax benefits?
165. What should guide the selection of the post-
A) Leveraged buyout closing organization?
B) Employee Stock Ownership Plan (ESOP) structure
C) Common stock issuance A) The goals of the target firm
D) Debt financing B) The goals of the acquiring company
C) The goals of the legal entity being used
Answer: B) Employee Stock Ownership Plan (ESOP) D) The goals of the financing source
structure
Answer: B) The goals of the acquiring company
162. What is the most frequently utilized corporate
structure for acquisitions?
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166. What is a reason the acquiring company may

choose a post-closing structure that maintains A) Centralized managerial control
target independence throughout the duration of an B) Tight cooperation and consensus
earn-out? C) Lack of distributed ownership
D) Independent decision-making
A) To make post-closing integration easier
B) To reduce the risk of the target's liabilities Answer: B) Tight cooperation and consensus
C) To preserve unique target characteristics
D) To minimize taxes 170. Why might realizing synergies take longer in
joint ventures and partnerships?
Answer: C) To preserve unique target
characteristics A) Due to tight cooperation
B) Due to distributed ownership
167. Why is the corporate or divisional structure C) Due to centralized managerial control
frequently chosen when the acquirer plans to D) Due to controversial decision-making
immediately integrate the target after finalizing the
transaction? Answer: B) Due to distributed ownership
A) It minimizes taxes
B) It allows for the greatest amount of control 171. In what situations may a holding company
C) It maintains the tax-free status of the deal structure be preferable as the acquisition vehicle?
D) It passes through losses to shelter the owners'
tax liabilities A) When the target company has large liabilities
B) When the target company is a foreign
Answer: B) It allows for the greatest amount of corporation
control C) When the acquirer is a financial investor
D) All of the above
168. Why may decision-making be slowed down or
made more controversial in joint ventures and Answer: D) All of the above
partnerships?
172. How might the parent company handle specific
A) Due to a lack of distributed ownership obligations within the subsidiary to avoid
B) Due to tight cooperation and consensus jeopardizing the parent?
C) Due to centralized managerial control
D) Due to the absence of liabilities A) Implementing tight cooperation
B) Pushing the subsidiary into bankruptcy
Answer: A) Due to distributed ownership C) Creating a holding company structure
D) Avoiding cultural differences
169. What is more likely to slow down efforts at
speedy integration in joint ventures and Answer: B) Pushing the subsidiary into bankruptcy
partnerships?
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173. Under what circumstances might acquirers use 176. In what situations are acquirers typically more
cash as a form of payment? inclined to make stock offers?
A) When the target company has a low credit rating A) When the acquirer has a smaller cash holding
B) When the acquirer wants to lose control of the B) When the target's credit rating is high
company C) When the acquirer has larger cash holdings
C) When the target company has considerable D) When the target's company has a low credit
borrowing capacity, a high credit rating, cheap rating
shares, and the desire to preserve control
D) When the acquirer has a smaller cash holding Answer: C) When the acquirer has larger cash
holdings
Answer: C) When the target company has
considerable borrowing capacity, a high credit 177. What might influence the target's preference
rating, cheap shares, and the desire to preserve for the acquirer's stock over cash?
control
A) Desire for a tax-free transaction
174. What is the surprising observation regarding B) Acquirer's desire for growth
the correlation between an acquirer's cash balances C) Target's perception of the acquirer's company's
and the likelihood of making a cash offer? prospects for growth or a tax-free transaction
D) Acquirer's lack of credit rating
A) There is a strong correlation
B) There is no correlation Answer: C) Target's perception of the acquirer's
C) Acquirers with larger cash holdings are less company's prospects for growth or a tax-free
inclined to make cash offers transaction
D) Acquirers with smaller cash holdings are less
inclined to make cash offers 178. When is a cash transaction more likely to be
financed by borrowing?
Answer: C) Acquirers with larger cash holdings are
less inclined to make cash offers A) When the acquirer has a low credit rating
B) When the target company has a high credit rating
175. What might be a reason for the seeming oddity and relatively low borrowing costs
mentioned in the passage regarding acquirers' cash C) When the target company has high borrowing
holdings and their likelihood to make cash offers? costs
D) When the acquirer has limited borrowing
A) Target's preference for the acquirer's stock capacity
B) Target's preference for cash
C) Acquirer's desire for a tax-free transaction Answer: B) When the target company has a high
D) Acquirer's lack of interest in the target's credit rating and relatively low borrowing costs
company
Answer: A) Target's preference for the acquirer's
stock
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179. What is a characteristic of highly leveraged 182. Why might an acquirer prefer to pay for the
acquirers regarding cash transactions? acquisition with its own shares?
A) They are more likely to offer agreements A) If the target company is undervalued
consisting entirely of cash B) If the target company is overvalued
B) They are less likely to pay less cash in mixed C) If the acquirer has surplus cash balances
payment offers D) If the acquirer has limited borrowing capacity
C) They are more likely to offer mixed payment
offers that include both cash and stock Answer: B) If the target company is overvalued
D) They are less likely to pay any cash
183. Why might acquirer's stock be utilized as the
Answer: C) They are more likely to pay less cash in principal form of payment instead of cash?
mixed payment offers that include both cash and
stock A) To increase the total amount of debt
B) To reduce the total amount of debt
180. What might undervalued shares lead to for the C) To complicate the takeover process
acquirer? D) To eliminate the need for borrowing money
A) Increase in the acquirer's existing shareholder Answer: B) To reduce the total amount of debt
base
B) Decrease in the acquirer's existing shareholder 184. What advantage does using acquirer's stock as
base the principal form of payment provide during the
C) No impact on the existing shareholder base integration period?
D) Increase in the target's shareholder base
A) It increases the total amount of debt
Answer: B) Decrease in the acquirer's existing B) It reduces the ability to borrow money
shareholder base C) It helps finance unplanned cash outlays and
explore investment possibilities
181. Under what circumstances might the bidder D) It complicates the integration process
choose to pay for the target with cash rather than
shares? Answer: C) It helps finance unplanned cash outlays
and explore investment possibilities
A) When the bidder's dominant shareholder desires
more voting control
B) When the bidder has a high credit rating
C) When the target's shareholder base is small
D) When the bidder has limited borrowing capacity
Answer: A) When the bidder's dominant

shareholder desires more voting control
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185. In what situation are companies more likely to 188. Why might providing target shareholders with
make acquisitions using a form of payment other different payment choices motivate more of them
than cash? to participate in tender offers?
A) When the actual leverage is lower than desired A) To complicate the transaction
leverage B) To discourage shareholder participation
B) When the actual leverage is higher than desired C) To increase shareholder participation
leverage D) To eliminate the need for tender offers
C) When there is no difference between actual and
desired leverage Answer: C) To increase shareholder participation
D) When the desired leverage is unknown
189. When might target shareholders prefer a
Answer: B) When the actual leverage is higher transaction that includes a combination of cash and
than desired leverage acquirer stock?
186. When might acquirer's stock be a beneficial A) When they are confident about the prospective
type of payment? appreciation of the acquirer's shares
B) When they prefer an all-cash transaction
A) When the target company is easy to value C) When they are unsure about the prospective
B) When the target company has tangible assets appreciation of the acquirer's shares
C) When the target company has intangible assets D) When they want an all-stock transaction
that are difficult to value
D) When the target company has low R&D Answer: C) When they are unsure about the
expenditures prospective appreciation of the acquirer's shares
Answer: C) When the target company has 190. Why might some people prefer a combination
intangible assets that are difficult to value of cash and stock in a transaction?
187. What is an example of a non-cash source of A) To complicate the transaction

payment ? B) To avoid taxes
C) To pay taxes owed on the sale of their shares
A) Cash D) To eliminate the need for cash
B) Acquirer's stock
C) Real estate Answer: C) To pay taxes owed on the sale of their
D) Borrowed money shares
Answer: C) Real estate

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191. What might lead acquirers to opt for a

combination of cash and shares in an offer to the A) Lack of due diligence
target company? B) Concern about the accuracy of the offer price
C) Desire to pay more for the target company
A) The ability to borrow money easily D) Withholding vital information
B) The desire to take on dilution
C) Inability to borrow money or hesitation to take Answer: B) Concern about the accuracy of the
on the dilution of an all-stock offer offer price
D) The desire to issue more shares
195. How might using acquirer's stock as the
Answer: C) Inability to borrow money or hesitation primary form of payment partially mitigate the
to take on the dilution of an all-stock offer problem of insufficient information?
A) By eliminating the need for due diligence

192. Why might acquirers feel more compelled to B) By encouraging target shareholders to withhold
sell fewer shares in a combination offer? vital information
C) By discouraging target shareholders from
A) To eliminate shareholder participation participating in any future appreciation
B) To avoid the need for tender offers D) By making target shareholders more likely to
C) Because they consider the price they paid for the disclose vital information
shares was excessive
D) To complicate the transaction Answer: D) By making target shareholders more
likely to disclose vital information
Answer: C) Because they consider the price they
paid for the shares was excessive 196. What problem does using acquirer's stock as
the primary form of payment not solve?
193. What is a concern for both the acquirer and
the shareholders of the target company? A) Lack of due diligence
B) Concern about the accuracy of the offer price
A) The desire to pay too much for the target being fair to the shareholders
company C) Desire to pay too much for the target company
B) The accuracy of the offer price in reflecting the D) Encouraging target shareholders to withhold vital
value of their shares information
C) Withholding vital information
D) Lack of due diligence Answer: B) Concern about the accuracy of the
offer price being fair to the shareholders
Answer: B) The accuracy of the offer price in
reflecting the value of their shares
194. Why might the acquirer be anxious about

paying too much for the target company?
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197. How might convertible securities alleviate the B) They eliminate the potential for future share
concerns of both the buyer and the target when appreciation
they lack vital knowledge about each other? C) They decrease the value of the debt at maturity
D) They discourage participation in future share
A) By encouraging the buyer to pay too much appreciation
B) By discouraging the buyer from conducting due
diligence Answer: A) They provide a floor equal to the value
C) By eliminating the need for a fair purchase price of the debt at maturity
D) By having the potential to alleviate concerns of
both parties 201. When might potential buyers be more likely to
make an offer of stock?
Answer: D) By having the potential to alleviate
concerns of both parties A) When they think the price of their shares is too
high
198. Why might bidders who think their shares are B) When they believe their shares are undervalued
undervalued be hesitant to use stock as payment? C) When they want to encourage dilution
D) When they prefer cash offers
A) To encourage share dilution
B) To avoid diluting the ownership of existing Answer: A) When they think the price of their
shareholders shares is too high
C) To decrease the value of their shares
D) To discourage target shareholders from 202. What is a potential drawback if convertible
participating securities are doubtful to be converted into equity
due to limited share price appreciation?
Answer: B) To avoid diluting the ownership of
existing shareholders A) Elimination of share dilution
B) Increased value of the bidder's stock
199. What might bidders offer if they believe their C) Functioning as debt with significant leverage
shares are worth less than they should be? D) Encouraging future share appreciation
A) Cash only Answer: C) Functioning as debt with significant

B) Convertible debt leverage
C) Stock only
D) Convertible stock 203. What do accounting concerns primarily
address in the context of a business acquisition?
Answer: B) Convertible debt
A) Tax structures
200. Why might target shareholders find offers of B) Future earnings
convertible debt appealing? C) Legal structures
A) They provide a floor equal to the value of the D) Core economics
debt at maturity Answer: B) Future earnings
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204. What is the primary focus of tax considerations

in the context of a transaction? 208. What is emphasized as the primary threat to
the profitability of the acquirer in the context of
A) Accounting requirements accounting concerns?
B) Core economics
C) Tax structures A) Legal structure
D) Legal ramifications B) Tax structures
C) Core economics
Answer: C) Tax structures D) Future earnings
205. Why is it important not to ignore the tax Answer: C) Core economics
ramifications of the selling entity's legal structure?
209. In the context of acquisition, which party
A) To reinforce the purchasing decision typically finds tax implications less crucial?
B) To prioritize core economic aspects
C) To influence future earnings A) Buyer
D) To minimize accounting concerns B) Seller
C) Both parties equally
Answer: A) To reinforce the purchasing decision D) Legal entities
206. According to the information provided, what Answer: A) Buyer

should always be the decisive factor in a business
sale? 210. What is the primary concern of buyers in a
business acquisition, as mentioned in the passage?
A) Tax benefits
B) Core economics A) Structuring the transaction
C) Accounting concerns B) Assessing the basis of acquired assets
D) Legal structure C) Avoiding accountability for tax issues
D) Postponing tax payments
Answer: B) Core economics
Answer: B) Assessing the basis of acquired assets
207. Despite being a significant consideration, what
should never override the core economic aspects in 211. How does the tax basis of an asset affect the
a business deal? buyer in the future?
A) Tax ramifications A) Determines the consideration in the transaction

B) Accounting concerns B) Affects the structure of the transaction
C) Legal structure C) Determines future taxable gains
D) Future earnings D) Postpones tax payments
Answer: A) Tax ramifications Answer: C) Determines future taxable gains

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212. What is the primary concern of sellers in a Answer: B) Direct cash merger
transaction, according to the passage?
216. What is a forward triangular merger?
A) Avoiding accountability for tax issues
B) Assessing the basis of acquired assets A) The acquisition of a subsidiary by the target
C) Structuring the transaction company
D) Postponing tax payments B) The acquisition of a target company by a
subsidiary of the purchasing company
Answer: D) Postponing tax payments C) The merger of the target company into the
acquirer
213. When is a transaction considered taxable to D) The merger of the acquirer into the shell
the shareholders of the target company? company
A) When the consideration is in the form of equity Answer: B) The acquisition of a target company by
B) When the consideration is in the form of cash, a subsidiary of the purchasing company
debt, or other than equity
C) When there are no tax issues involved 217. How does a reverse triangular merger differ
D) When the basis of assets is low from a forward triangular merger?
Answer: B) When the consideration is in the form A) In a reverse triangular merger, the target
of cash, debt, or other than equity company is merged into the shell company.
B) In a reverse triangular merger, the shell company
214. Which of the following transactions is subject is merged into the target company.
to taxation, according to the passage? C) Reverse triangular mergers involve the
acquisition of a subsidiary.
A) Equity purchase of target assets D) Forward triangular mergers involve the merger
B) Cash purchase of target shares of the acquirer into the target company.
C) Stock-for-stock exchange
D) Gift of target assets Answer: B) In a reverse triangular merger, the shell
company is merged into the target company.
Answer: B) Cash purchase of target shares
218. What is a common tactic adopted by acquirers
215. Which type of merger or consolidation is to shield themselves from the liabilities of their
specifically mentioned as subject to taxation in the targets?
passage?
A) Direct statutory cash merger
A) Stock-for-stock merger B) Reverse triangular merger
B) Direct cash merger C) Direct statutory stock merger
C) Asset purchase with equity consideration D) Stock-for-stock exchange
D) Reverse cash merger
Answer: B) Reverse triangular merger
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219. In a direct statutory cash merger, what is B) The target company is merged into the acquirer's
required for approval? operating or shell acquisition subsidiary.
C) Both companies cease to exist.
A) Approval from the target company's D) The target company continues to exist with no
shareholders only changes.
B) Approval from both the acquirer and target
boards Answer: B) The target company is merged into the
C) Approval from the acquirer's shareholders only acquirer's operating or shell acquisition subsidiary.
D) No shareholder approval is required
223. What characterizes a reverse triangular cash
Answer: B) Approval from both the acquirer and merger?
target boards
A) The acquirer's subsidiary continues to exist.
220. What is the key feature of a direct statutory B) The target company is merged into the acquirer's
stock merger? subsidiary.
C) Both companies cease to exist.
A) All assets and liabilities are transferred D) The target company continues to exist with no
immediately. changes.
B) The form of payment is cash.
C) The target is always merged into the acquirer. Answer: A) The acquirer's subsidiary continues to
D) The acquirer and target boards come to a exist.
negotiated settlement.
224. What is the consequence of a forward
Answer: A) All assets and liabilities are transferred triangular cash merger?
immediately.
A) Both companies cease to exist.
221. What happens to the assets and liabilities in a B) The target company is merged into the acquirer's
direct statutory stock merger? subsidiary.
C) The acquirer's subsidiary is merged into the
A) They remain with the target company. target company.
B) They are transferred to the acquirer. D) The target company continues to exist with the
C) They are evenly distributed between the acquirer subsidiary.
and the target.
D) They are extinguished. Answer: D) The target company continues to exist
with the subsidiary.
Answer: B) They are transferred to the acquirer.
222. What is a forward triangular cash merger?

A) The acquirer's subsidiary is merged into the
target company.
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225. What is the effect of a taxable cash purchase of D) Tax cost

target assets on the target company's tax cost or
basis? Answer: B) Historical cost less accumulated
depreciation
A) It remains the same.
B) It is decreased. 229. Why might the shareholders of the target
C) It is stepped up to fair market value. company be subject to double taxation in certain
D) It is eliminated. transactions?
Answer: C) It is stepped up to fair market value. A) Due to the liquidation of the target company
B) Because of the immediate gain or loss on assets
226. When does the tax cost or basis of the target C) When the firm pays taxes on any gains, and then
company's assets get "stepped up" in a cash again when proceeds are distributed
purchase of target assets? D) When the buyer purchases a significant portion
of the target company's voting stock
A) When the acquirer assumes none of the target
company's liabilities. Answer: C) When the firm pays taxes on any gains,
B) When the acquirer assumes all of the target and then again when proceeds are distributed
company's liabilities.
C) When the acquirer assumes some of the target 230. Under what circumstance might a target
company's liabilities. company be forced into liquidation?
D) When the acquirer assumes no liabilities.
A) When the buyer purchases a significant portion
Answer: C) When the acquirer assumes some of of its voting stock
the target company's liabilities. B) When the buyer purchases a significant portion
of its assets
227. What is the immediate gain or loss recognized C) When the company recognizes an immediate
by a company when it sells assets? gain
D) When the accumulated depreciation is high
A) Book value
B) Accumulated depreciation Answer: B) When the buyer purchases a significant
C) Double taxation portion of its assets
D) Liquidation gain
231. What does the degree of subordination refer
Answer: A) Book value to in the context of credit ratings?
228. In the context of selling assets, what does the A) CEO's authority
term "book value" represent? B) Bondholder preferences
A) Current market value C) Company's earnings
B) Historical cost less accumulated depreciation D) Level of risk in the debt issue
C) Future value Answer: B) Bondholder preferences
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232. What type of transaction prevents the target D) By avoiding taxes

company's shareholders from being subject to
double taxation on gains? Answer: B) Through the sale of their stock
A) Taxable cash purchase of target stock 236. What is the tax status of transactions where
B) Taxable cash purchase of target assets the primary form of payment is acquirer stock?
C) Non-taxable stock purchase
D) Non-taxable asset purchase A) Exempt from taxation
B) Subject to partial taxation
Answer: A) Taxable cash purchase of target stock C) Fully taxable
D) Eligible for tax credits
233. What is required to prevent double taxation in
taxable transactions? Answer: A) Exempt from taxation
A) Purchase of acquirer stock

B) Purchase of target assets 237. When might transactions involving acquirer
C) Purchase of target voting stock stock be subject to partial taxation?
D) Liquidation of the target company
A) When there is continuity of ownership interests
Answer: C) Purchase of target voting stock B) When there is continuity of business enterprise
C) When shareholders receive something other than
234. Why do taxable stock purchases between the acquirer stock
acquirer and the shareholders of the target D) When there is a legitimate business objective
company not result in double taxation?
Answer: C) When shareholders receive something
A) The target company is exempt from taxes. other than acquirer stock
B) The transaction is between the acquirer and the
target company. 238. What is the term used for non-equity
C) Shareholders of the target company can make a consideration often subject to the same taxation as
profit. regular income?
D) The transaction takes place between the acquirer
and the shareholders. A) Step-transaction theory
B) Boot
Answer: D) The transaction takes place between C) Fair Market Value
the acquirer and the shareholders. D) Continuity of business enterprise
235. How can shareholders of the target company Answer: B) Boot

make a profit or loss in a taxable stock purchase?
A) Through the sale of acquirer stock
B) Through the sale of their stock
C) By receiving non-equity consideration
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239. In tax-free transactions, what is required to Answer:A) Purchase of substantially all of the
avoid automatic increases in the value of newly target company's assets
acquired assets?
243. What is the purpose of requiring the acquirer
A) Continuity of ownership interests to operate a large amount of the target's "historic
B) Continuity of business enterprise business assets"?
C) Legitimate business objective
D) Triggering taxes in the transaction A) To minimize tax obligations
B) To demonstrate continuity of ownership interests
Answer: D) Triggering taxes in the transaction C) To evade taxes
D) To increase target shareholders' profits
240. What does the step-transaction theory require
for a transaction to be exempt from paying taxes? Answer: B) To demonstrate continuity of
ownership interests
A) Continuity of ownership interests
B) Continuity of business enterprise 244. What must the transaction serve, according to
C) A legitimate business objective the information provided?
D) All of the above
A) Legitimate commercial goal
Answer: D) All of the above B) Tax evasion
C) Reduction of acquirer's profits
241. Why is it necessary for the majority of the D) Continuity of business names
purchase price to be comprised of acquirer stock?
Answer: A) Legitimate commercial goal
A) To demonstrate a long-term commitment to the
target 245. What does the acquirer need to demonstrate
B) To minimize tax obligations to meet the requirements of "continuity of
C) To reduce the value of the combined firms commercial enterprise"?
D) To increase target shareholders' profits
A) Purchase of substantially all of the target
Answer: A) To demonstrate a long-term company's assets
commitment to the target B) Majority ownership of the purchase price
C) Majority ownership of acquirer stock
242. What is required for "continuity of commercial D) Continuation of the target's historic business
enterprise" to be demonstrated in an acquisition? assets
A) Purchase of substantially all of the target Answer: E) Continuation of the target's historic
company's assets business assets
B) Majority ownership of acquirer stock
C) Sale of target's historic business assets
D) Continuity of business names
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246. According to the step-transaction concept, A) The shareholder must be a foreign entity.
what is not allowed for the transaction in question? B) The shareholder must be a public company.
C) The amalgamated company must be a foreign
A) Legitimate commercial goal company.
B) Continuity of ownership interests D) The transfer occurs in a scheme of
C) Being a component of a wider scheme amalgamation, and the conditions of Section 47(vii)
constituting a taxable agreement and Section 49(2) are satisfied.
D) Majority ownership of acquirer stock
Answer: D) The transfer occurs in a scheme of
Answer: C) Being a component of a wider scheme amalgamation, and the conditions of Section 47(vii)
constituting a taxable agreement and Section 49(2) are satisfied.
247. What tax relief is provided to the 250. What condition must be met for the allotment
amalgamating company under Section 47(vi) of the of shares in the amalgamated company to the
Income Tax Act, 1961? shareholders of the amalgamating company to be
exempt from tax?
A) Exemption from Goods and Services Tax (GST)
B) Exemption from Capital Gains Tax A) The scheme of amalgamation must not satisfy
C) Exemption from Corporate Income Tax the conditions of Section 2(1B).
D) Exemption from Value Added Tax (VAT) B) The amalgamated company must be a foreign
company.
Answer: B) Exemption from Capital Gains Tax C) The scheme of amalgamation must satisfy the
conditions of Section 2(1B), and the amalgamated
248. Under what conditions is the capital gain company must be an Indian company.
arising from the transfer of assets exempt from tax D) The amalgamated company must not be an
in the case of amalgamation? Indian company.
A) The amalgamated company is a foreign company. Answer: C) The scheme of amalgamation must
B) The amalgamated company is a public company. satisfy the conditions of Section 2(1B), and the
C) The scheme of amalgamation satisfies the amalgamated company must be an Indian company.
conditions of Section 2(1B).
D) The scheme of amalgamation does not satisfy 251. What section of the Income Tax Act, 1961,
the conditions of Section 2(1B). provides exemption from Capital Gains Tax in the
case of amalgamation?
Answer: C) The scheme of amalgamation satisfies
the conditions of Section 2(1B). A) Section 2(1B)
B) Section 49(2)
249. What is required for the transfer of shares by a C) Section 47(vi)
shareholder in a scheme of amalgamation to not be D) Section 47(vii)
regarded as a transfer?
Answer: C) Section 47(vi)
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252. What is the specific requirement for the 255. what is the cost of shares of the amalgamating
amalgamated company to qualify for the exemption company when transferred in consideration of the
from Capital Gains Tax? allotment of shares in the amalgamated company?
A) It must be a foreign company. A) The market value of the shares at the time of
B) It must be a private company. transfer.
C) It must be an Indian company. B) The original cost of the shares to the
D) It must be a public company. amalgamating company.
C) The fair market value of the shares at the time of
Answer: C) It must be an Indian company. transfer.
D) The cost of shares to the amalgamated company.
253. What tax is the amalgamating company Answer: D) The cost of shares to the amalgamated
exempt from under Section 47(vi)? company.
A) Corporate Income Tax 256. What condition must be met for capital gains
B) Value Added Tax (VAT) arising from the transfer of shares by a shareholder
C) Goods and Services Tax (GST) of the amalgamating companies to be exempt from
D) Capital Gains Tax tax under Section 47(vii)?
Answer: D) Capital Gains Tax A) The transferee company must be an Indian

company.
254. What condition must be satisfied for the B) The transferor company must be a foreign
transfer of shares by a shareholder of the company.
amalgamating companies to be exempt from C) The transfer must not be in consideration of the
Capital Gains Tax under Section 47(vii)? allotment of shares in the amalgamated company.
D) The transfer must be in consideration of the
A) The transferor company must be a foreign allotment of shares in the amalgamated company,
company. and the amalgamated company must be an Indian
B) The transferee company must be a public company.
company.
C) The transfer is made in consideration of the Answer: D) The transfer must be in consideration
allotment of shares in the amalgamated company. of the allotment of shares in the amalgamated
D) The transferor company must be an Indian company, and the amalgamated company must be
company. an Indian company.
Answer: C) The transfer is made in consideration of

the allotment of shares in the amalgamated
company.
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257. What does Section 47(vii) provide exemption C) Public company

from? D) Amalgamated company
A) Corporate Income Tax Answer: D) Amalgamated company

B) Goods and Services Tax (GST)
C) Value Added Tax (VAT) 261. Under Section 72A of the Income Tax Act,
D) Capital Gains Tax 1961, what does the carry forward and set off of
accumulated losses and unabsorbed depreciation
Answer: D) Capital Gains Tax apply to?
258. What is the meaning of 'transferor company' in A) Mergers of any companies

the context of amalgamation? B) Mergers of healthy companies only
C) Mergers of sick companies with healthy
A) The company formed after the merger. companies
B) The Indian company involved in the D) Mergers of foreign companies
amalgamation.
C) The company which is merging (amalgamating Answer: C) Mergers of sick companies with healthy
company). companies
D) The company that receives shares in the
amalgamation. 262. What conditions must be fulfilled for a
company to benefit from the carry forward of
Answer: C) The company which is merging accumulated losses and unabsorbed depreciation
(amalgamating company). under Section 72A?
259. What is the meaning of 'transferee company' A) The company must be a public sector company.
in the context of amalgamation? B) The company must be a banking company.
C) The company must own an industrial
A) The company formed after the merger. undertaking, ship, or hotel.
B) The Indian company involved in the D) The company must be a foreign company.
amalgamation.
C) The company which is merging (amalgamating Answer: C) The company must own an industrial
company). undertaking, ship, or hotel.
D) The company that receives shares in the
amalgamation.
Answer: A) The company formed after the merger.
260. what is the transferee company also known

as?
A) Amalgamating company
B) Foreign company
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263. What is one of the conditions for the benefits D) All of the above
under Section 72A?
Answer: D) All of the above
A) Mergers of any type of companies
B) Mergers involving foreign companies 267. What does Note 2 define as a 'Specified bank'
C) Mergers of public sector companies only for the purposes of Section 72A?
D) Mergers meeting specific criteria, such as owning
industrial undertakings, ships, or hotels A) Any foreign bank operating in India
B) Any private bank in India
Answer: D) Mergers meeting specific criteria, such C) The State Bank of India and its subsidiaries
as owning industrial undertakings, ships, or hotels D) Any public sector bank
264. what does the term 'Industrial Undertaking' Answer: C) The State Bank of India and its
encompass for the purposes of Section 72A? subsidiaries
A) Any service-oriented business 268. Which banks are considered 'Specified banks'
B) Any financial institution under Note 2?
C) Any manufacturing or production unit
D) Any commercial enterprise A) Foreign banks operating in India
B) Public sector banks
Answer: C) Any manufacturing or production unit C) Private banks in India
D) The State Bank of India and its subsidiaries
265. Which of the following is included in the
definition of 'Industrial Undertaking' as per Note 1? Answer: D) The State Bank of India and its
subsidiaries
A) The business of providing telecommunication
services 269. what constitutes a 'Specified bank'?
B) The generation or distribution of electricity
C) The construction of ships, aircraft, or rail systems A) Any bank incorporated under the Companies Act
D) The business of mining B) Any foreign bank operating in India
C) Any bank constituted under the Banking
Answer: C) The construction of ships, aircraft, or Companies (Acquisition and Transfer of
rail systems Undertakings) Act
D) The State Bank of India, a subsidiary bank, or a
266. which of the following activities qualifies as an corresponding new bank
'Industrial Undertaking'?
Answer: D) The State Bank of India, a subsidiary
A) The business of providing telecommunication bank, or a corresponding new bank
services
B) The construction of ships, aircraft, or rail systems
C) The generation or distribution of electricity
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270. What is a condition for availing the benefits

under Section 72A related to the amalgamated Answer: C) The book value should be at least three-
company? fourths of the fixed assets held by it.
A) The amalgamated company should be a foreign 273. How long must the amalgamated company
company. hold at least three-fourths in the book value of fixed
B) The amalgamated company should be a public assets of the amalgamating company acquired in a
sector company. scheme of amalgamation?
C) The amalgamated company should be an Indian
company. A) 1 year
D) The amalgamated company should be a private B) 3 years
company. C) 5 years
D) 10 years
Answer: C) The amalgamated company should be
an Indian company. Answer: C) 5 years
271. what is the minimum period for which the 274. What is the minimum period for which the
amalgamating company should be engaged in the amalgamated company must continue the business
business, in which the accumulated loss occurred or of the amalgamating company from the date of
depreciation remains unabsorbed? amalgamation?
A) 1 year A) 1 year
B) 2 years B) 3 years
C) 3 years or more C) 5 years
D) 5 years D) 10 years
Answer: C) 3 years or more Answer: C) 5 years
272. What condition must the amalgamating 275. What is the purpose of fulfilling other
company fulfill concerning the book value of its conditions as prescribed under Section 72A?
fixed assets two years prior to the date of
amalgamation? A) To minimize tax obligations
B) To ensure the revival of the business of the
A) The book value should be at least half of the amalgamating company
fixed assets held by it. C) To increase the profits of the amalgamated
B) The book value should be at least one-fourth of company
the fixed assets held by it. D) To evade taxes
C) The book value should be at least three-fourths
of the fixed assets held by it. Answer:
D) The book value should be equal to the fixed B) To ensure the revival of the business of the
assets held by it. amalgamating company
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276. What condition must be fulfilled by the 279. When does the requirement to furnish Form
amalgamated company if it has acquired an 62 arise for the amalgamated company?
industrial undertaking of the amalgamating
company by way of amalgamation? A) Immediately after amalgamation
B) When amalgamated company achieves 100% of
A) Achieve 100% of the installed capacity of the said the installed capacity
undertaking C) When amalgamated company fulfills conditions
B) Achieve 75% of the installed capacity of the said of achieving 50% of the installed capacity within
undertaking four years
C) Achieve 50% of the installed capacity of the said D) After five years from the date of amalgamation
undertaking
D) Achieve 25% of the installed capacity of the said Answer:
undertaking C) When amalgamated company fulfills conditions
of achieving 50% of the installed capacity within
Answer: C) Achieve 50% of the installed capacity of four years
the said undertaking
280. What document must the amalgamated
277. What is the minimum period for which the company furnish to the Assessing Officer, duly
amalgamated company must achieve and maintain verified by an accountant, when the conditions are
the minimum level of production for the industrial satisfied?
undertaking acquired through amalgamation?
A) Form 62
A) Four years from the date of amalgamation B) Form 63
B) Five years from the date of amalgamation C) Form 64
C) Three years from the date of amalgamation D) Form 65
D) Two years from the date of amalgamation
Answer: A) Form 62
Answer: B) Five years from the date of
amalgamation 281. When does the amalgamated company first
need to furnish Form 62?
278. Who has the authority to relax the condition
related to achieving and maintaining the minimum A) Immediately after amalgamation
level of production in desired situations? B) After four years from the date of amalgamation
C) After five years from the date of amalgamation
A) Assessing Officer D) When conditions of achieving 50% of the
B) Central Government installed capacity are fulfilled within four years
C) Accountant
D) Amalgamated company Answer: D) When conditions of achieving 50% of
the installed capacity are fulfilled within four years
Answer: B) Central Government
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282. What is the consequence when the conditions B) The amalgamated company's business loss and
related to achieving and maintaining the minimum unabsorbed depreciation are treated as income.
level of production are satisfied? C) The amalgamated company is exempt from
taxation.
A) Accumulated business loss and unabsorbed D) The amalgamated company is eligible for a tax
depreciation are deemed to be capital loss. refund.
B) Accumulated business loss and unabsorbed
depreciation are deemed to be revenue loss. Answer: B) The amalgamated company's business
C) Accumulated business loss and unabsorbed loss and unabsorbed depreciation are treated as
depreciation are deemed to be business loss. income.
D) Accumulated business loss and unabsorbed
depreciation are deemed to be personal loss. 285. Under Section 115JB of the Income Tax Act,
what does MAT (Minimum Alternate Tax) apply to?
Answer: C) Accumulated business loss and
unabsorbed depreciation are deemed to be A) Personal income
business loss. B) Company's book profits
C) Dividends
283. What happens if the specified conditions for D) Capital gains
the amalgamated company are not fulfilled, and
part of the brought forward loss and unabsorbed Answer: B) Company's book profits
depreciation has been set off?
286. What is the rate at which income-tax is levied
A) The amalgamated company receives a tax credit. under Section 115JB on a company's 'book profits'?
B) The amalgamated company is exempt from
taxation. A) 10%
C) That part of the brought forward loss and B) 15%
unabsorbed depreciation is treated as income for C) 20%
the year of failure. D) 25%
D) The amalgamated company is eligible for a tax
refund. Answer: B) 15%
Answer: C) That part of the brought forward loss 287. What is permitted to be carried forward under
and unabsorbed depreciation is treated as income Section 115JAA of the Income Tax Act?
for the year of failure.
A) Normal tax liability
284. What is the consequence if the conditions B) MAT credit
related to achieving and maintaining the minimum C) Surcharge
level of production are not satisfied? D) Cess
A) The amalgamated company receives a tax credit. Answer: B) MAT credit

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288. What is the purpose of Section 115JAA of the Answer: B) There is no provision for the
Income Tax Act? amalgamated/resulting company to carry forward
and claim MAT Credit from the
A) To determine the normal tax liability of a amalgamating/demerged company.
company.
B) To calculate the excess of MAT paid over normal 291. Under which section of the Income Tax Act is
tax liability. capital gains tax assessed in the case of transfer of
C) To provide exemptions for certain companies. capital assets?
D) To regulate the taxation of personal income.
A) Section 47
Answer: B) To calculate the excess of MAT paid B) Section 2(14)
over normal tax liability. C) Section 45
D) Section 115JAA
289. When can the excess of MAT paid over normal
tax liability be set off under Section 115JAA? Answer: C) Section 45
A) In the same year

B) In the next financial year 292. When is a taxpayer required to pay capital
C) In future years when normal tax liability exceeds gains tax on the transfer of a capital asset?
MAT liability
D) It cannot be set off A) At the time of entering into the agreement to
transfer
Answer: C) In future years when normal tax liability B) At the time when consideration is received
exceeds MAT liability. C) When the shares qualify as capital assets
D) When the taxpayer decides to defer the payment
290. what is the status of carrying forward and
claiming MAT Credit for the amalgamated/resulting Answer: B) At the time when consideration is
company? received
A) The amalgamated/resulting company can carry 293. what does the term "transfer of the capital
forward and claim MAT Credit from the asset" refer to?
amalgamating/demerged company.
B) There is no provision for the A) The agreement to transfer
amalgamated/resulting company to carry forward B) The actual physical transfer of the asset
and claim MAT Credit from the C) The accrual of the right to receive payment
amalgamating/demerged company. D) The valuation of the capital asset
C) The MAT Credit automatically transfers to the
amalgamated/resulting company. Answer: C) The accrual of the right to receive
D) The MAT Credit is forfeited in the case of payment
amalgamation/demerger.
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294. What is the focus of tax issues in domestic

M&A transactions? A) Merger of Limited Liability Partnership into a
company
A) Enforcement of contractual obligations B) Allotment of securities or payment of cash
B) Fulfillment of conditions stipulated under the ITA consideration to shareholders
C) Regulatory compliance C) Availability of MAT credit
D) Dispute resolution mechanisms D) Payment of part consideration directly to
shareholders
Answer: B) Fulfillment of conditions stipulated
under the ITA Answer: D) Payment of part consideration directly
to shareholders
295. How have courts interpreted exemptions
provided under Section 47 of the Income Tax Act in 298. Which tax issue in domestic M&A is related to
relation to amalgamation and demerger in cases the merger of a Limited Liability Partnership into a
where conditions are not fulfilled? company?
A) Exemptions are automatically granted A) Availability of MAT credit

B) Exemptions are denied B) Merger of Limited Liability Partnership into a
C) Exemptions are subject to negotiation company
D) Exemptions depend on the size of the companies C) Cross-border taxation concerns
involved D) Allotment of securities to shareholders
Answer: B) Exemptions are denied Answer: B) Merger of Limited Liability Partnership

into a company
296. Which of the following is a tax issue in
domestic M&A related to payment to shareholders? 299. What is the primary concern in cross-border
transactions that leads to tax issues?
A) Availability of MAT credit
B) Merger of Limited Liability Partnership into a A) Allotment of securities to shareholders
company B) Double taxation of the same income or legal
C) Allotment of securities or payment of cash entity
consideration to shareholders C) Payment of consideration to shareholders
D) Cross-border taxation concerns D) Merger of Limited Liability Partnership into a
company
Answer: C) Allotment of securities or payment of
cash consideration to shareholders Answer: B) Double taxation of the same income or
legal entity
297. In domestic M&A, what situation is covered by

the tax issue of "Part consideration paid directly to
shareholders of demerged company"?
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300. How do countries typically address the issue of C) Acquisition method

double taxation in cross-border transactions? D) Equity method
A) By imposing additional taxes Answer: C) Acquisition method

B) By entering Bilateral Investment Treaties
C) By imposing trade restrictions 304. What does the acquisition method require in
D) By entering Bilateral Double Taxation Avoidance terms of recognizing and measuring identifiable
Agreements (DTAAs) assets and liabilities in a business combination?
Answer: D) By entering Bilateral Double Taxation A) Recognition at fair value

Avoidance Agreements (DTAAs) B) Recognition at historical cost
C) Recognition at net book value
301. Which three countries' Foreign Direct D) Recognition at face value
Investments (FDI) accounted for more than fifty
percent of all FDI in India, according to the Answer: A) Recognition at fair value
information provided?
305. Under Indian Accounting Standard (Ind-AS),
A) China, Japan, and the United States how are shares acquired by the buyer recorded?
B) Mauritius, Singapore, and Cyprus
C) Brazil, Russia, and South Africa A) At fair value
D) Australia, Canada, and the United Kingdom B) At historical cost
C) At net book value
Answer: B) Mauritius, Singapore, and Cyprus D) At face value
Answer: A) At fair value

302. What is the primary reason for worldwide
concern over treaty violations? 306. Which accounting standard provides detailed
guidance on the steps to be followed in accounting
A) Lack of interest in cross-border transactions for business combinations?
B) Increasing tax benefits for investors
C) Amendments to DTAAs by various countries A) I-GAAP
D) Growing ambiguity in tax laws B) IND AS 103
C) Generally Accepted Accounting Principles
Answer: D) Equity Accounting Standard
D) Amendments to DTAAs by various countries
Answer: B) IND AS 103
303. What method should an entity use to account
for each business combination?
A) Fair value method

B) Cost method
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307. When recording investments in subsidiaries Answer: C) Intangible assets are not recognized.
and associates under Indian Accounting Standard
(Ind-AS), what is the default method? 311. When does Goodwill arise in the context of a
share acquisition?
A) Historical cost
B) Fair value A) Goodwill arises when intangible assets are
C) Net book value recognized.
D) Face value B) Goodwill arises when there is a decrease in the
fair value of net assets.
Answer: B) Fair value C) Goodwill arises when the acquisition results in
control over the target company.
308. What is the term used to describe the D) Goodwill arises when tangible assets are
difference between the purchase price and the fair recognized at historical cost.
market value of the acquired net assets?
Answer: C) Goodwill arises when the acquisition
A) Net book value results in control over the target company.
B) Goodwill
C) Fair value 312. Which accounting method must be used to
D) Historical cost account for business combinations by a company
following International Financial Reporting
Answer: B) Goodwill Standards (IFRS) or Generally Accepted Accounting
Principles (GAAP)?
309. What is the term used to describe the
difference between acquired assets and assumed A) Equity method
liabilities? B) Consolidation method
C) Purchase method
A) Goodwill D) Cost method
B) Net assets
C) Fair value Answer: C) Purchase method
D) Historical cost
313. What does Goodwill represent in the context
Answer: B) Net assets of a business combination?
310. what is the treatment of intangible assets in A) Historical cost of acquired assets
the standalone books of the target company? B) Potential future financial gains from
A) Intangible assets are recognized at historical cost. unrecognized acquired assets
B) Intangible assets are recognized at fair value. C) Current fair value of acquired liabilities
C) Intangible assets are not recognized. D) Non-controlling interest in the target
D) Intangible assets are recognized at net book
value. Answer: B) Potential future financial gains from
unrecognized acquired assets
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314. When must the acquirer record assets,

liabilities, and any non-controlling interest in the Answer: C) It is recognized along with the goodwill
target in accordance with current accounting rules? attributable to it.
A) On the announcement date 318. Why does the buyer need to account for the
B) On the signing date non-controlling interest in a business combination?
C) On the closing date
D) On the purchase date A) To avoid recognition of goodwill
B) To facilitate comparisons across various
Answer: C) On the closing date transactions
C) To decrease the recorded assets and liabilities
315. What date typically coincides with the D) To limit the recognition of acquired net assets
purchase date in a business combination?
Answer: B) To facilitate comparisons across various
A) Announcement date transactions
B) Signing date
C) Closing date 319. How is non-controlling or minority interest
D) Recognition date typically presented in the equity account of a
consolidated balance sheet?
Answer: C) Closing date
A) Combined with the parent's equity
316. how are acquired assets and liabilities B) Shown separately from the parent's equity
recorded, even if the acquirer buys less than 100% C) Recorded as a liability
of the target? D) Ignored in the equity section
A) Recorded at net book value Answer: B) Shown separately from the parent's
B) Recorded at historical cost equity
C) Recorded at 100% of fair value
D) Not recorded until 100% ownership is achieved 320. What components should be included in the
consolidated income statement concerning non-
Answer: C) Recorded at 100% of fair value controlling interest?
317. When the acquirer buys less than 100% of the A) Only revenues and net income
target, how is the non-controlling interest B) Revenues, expenses, and net income or loss
recognized? C) Only expenses and net loss
D) Gains, losses, and other income
A) It is not recognized.
B) It is recognized as a liability. Answer: B) Revenues, expenses, and net income or
C) It is recognized along with the goodwill loss
attributable to it.
D) It is recognized separately from goodwill.
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321. In a scenario where Firm A purchases 50.1% of A) 100% of Firm B's earnings
Firm B, what must be recorded in Firm A's equity? B) 49.9% of Firm B's earnings
C) The entire net income of Firm B
A) 50.1% of the assets and liabilities of Firm B D) None of Firm B's earnings
B) 100% of the assets and liabilities of Firm B
C) Only the assets of Firm B Answer: A) 100% of Firm B's earnings
D) None of the assets and liabilities of Firm B
325. What are the common financing options for
Answer: B) 100% of the assets and liabilities of Firm M&A deals ?
B
A) Cash only
322. How is the non-controlling stake (49.9%) B) Stock only
treated by Firm A in terms of assets and liabilities? C) Debt only
D) Cash, stock, and debt
A) Excluded from Firm A's assets and liabilities
B) Recognized separately as a liability Answer: D) Cash, stock, and debt
C) Added to Firm A's assets and liabilities
D) Treated as a deduction from Firm A's net income 326. How was the $17.7 billion acquisition of US
cable operator Cablevision by Altice financed?
Answer: C) Added to Firm A's assets and liabilities
A) Solely through bank financing
B) Exclusively using cash on hand
323. What does it mean when Firm A sees the non- C) A combination of bank financing, cash on hand,
controlling stake as "merely another type of stock"? and new equity offerings
D) Entirely through new equity offerings
A) The non-controlling interest is not recognized in
the consolidated financial statements. Answer: C) A combination of bank financing, cash
B) The non-controlling interest is treated as a on hand, and new equity offerings
separate entity.
C) The non-controlling interest is considered
equivalent to common stock.
D) The non-controlling interest is excluded from the
consolidated income statement.
Answer: C) The non-controlling interest is

considered equivalent to common stock.
324. What is added to the consolidated firms'

retained earnings concerning Firm B's income
statement?
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327. What factors influence the choice of financing 330. What does the term "clientele" refer to in the
source or sources for an M&A deal? context of M&A financing?
A) Only the state of the capital markets A) The target company's customers
B) Only the liquidity and creditworthiness of the B) The acquirer's existing shareholders
target and acquiring companies C) The financial advisors involved in the deal
C) Multiple variables, including the state of the D) The different types of investors that may be
capital markets, liquidity, creditworthiness, attracted based on financing choices
borrowing capacity, transaction size, and target
shareholders' preferences Answer: D) The different types of investors that
D) Target shareholders' preference for cash or may be attracted based on financing choices
acquirer shares
331. How can a company attract investors when
Answer: C) Multiple variables, including the state issuing shares for financing?
of the capital markets, liquidity, creditworthiness,
borrowing capacity, transaction size, and target A) By emphasizing the goal of creating liquidity
shareholders' preferences B) By indicating that the proceeds will be reinvested
back into the company
328. How might an acquirer attract different kinds C) By clearly stating that the goal is to finance future
of investors in the context of financing? acquisitions
D) By guaranteeing a fixed return to investors
A) By coupling choices of financing and acquisition
B) By decoupling choices of financing and Answer: C) By clearly stating that the goal is to
acquisition finance future acquisitions
C) By exclusively focusing on stock offerings
D) By prioritizing debt as the sole financing option 332. How can the composition of an acquirer's
investor base impact the returns on the
Answer: B) By decoupling choices of financing and announcement date of an acquisition?
acquisition
A) It has no impact on returns
329. why might a company issue shares prior to a B) Larger returns are expected with a less favorable
bid? investor composition
C) Larger returns are expected with a more
A) To dilute the ownership of existing shareholders favorable investor composition
B) To raise money for financing a cash purchase of a D) Returns are solely determined by market
target conditions
C) To avoid financial disclosure requirements
D) To decrease the attractiveness of the company to Answer: C) Larger returns are expected with a
potential acquirers more favorable investor composition
Answer: B) To raise money for financing a cash
purchase of a target
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333. How can the timing of share issuance impact D) High cost after taxes
the value of a deal to the acquirer?
Answer: B) Boosting earnings per share
A) It has no impact on deal value
B) The deal value is enhanced if shares are issued 337. What is a potential drawback of having an
during periods of low valuation excessive amount of debt?
C) The deal value is enhanced if shares are issued
during periods of high valuation A) Boosted earnings per share
D) The deal value is independent of share issuance B) Increased risk of default
timing C) Higher returns on equity
D) Enhanced investment opportunities
Answer: C) The deal value is enhanced if shares are
issued during periods of high valuation Answer: B) Increased risk of default
334. What determines the financing options 338. What trend has been observed in the
available to an acquirer? proportion of businesses operating with little to no
leverage in the United States since the late 1970s?
A) Market conditions
B) The particulars of the contract A) A significant decrease
C) The industry's valuation B) A significant increase
D) The acquirer's credit rating C) No change
D) Fluctuations without a clear trend
Answer: B) The particulars of the contract
Answer: B) A significant increase
335. Which financing option is explicitly mentioned
among the various options available to an acquirer? 339. What percentage of businesses had no debt in
2010?
A) Debt financing
B) Issuance of equity and/or preference shares A) Approximately 7%
C) Operating capital B) Approximately 14%
D) Reinvestment in the company C) Approximately 20%
D) Approximately 35%
Answer: B) Issuance of equity and/or preference
shares Answer: C) Approximately 20%
336. What is one of the factors contributing to the

desirability of long-term debt mentioned in the
passage?
A) Increased risk of default
B) Boosting earnings per share
C) Hindering investment opportunities
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340. What do companies value more? 344. What is the reason behind the lower ranking of
subordinated debentures?
A) Tax benefits associated with debt
B) Flexibility provided by low leverage A) They are secured by specific assets
C) Unanticipated investment possibilities B) They are senior in liquidation
D) Incremental debt after a merger C) They are unsecured
D) They provide lower tax benefits
Answer: B) Flexibility provided by low leverage
Answer: C) They are unsecured
341. Why do merging companies with relatively
uncorrelated cash flows tend to increase their 345. What is the primary form of compensation
leverage after a deal? provided to the buyer of convertible bonds?
A) To maximize tax benefits A) High coupon rate

B) To decrease overall cash flows B) Ability to convert into common stock at a
C) To facilitate payment of interest and principal on discount
incremental debt C) Fixed maturity date
D) To decrease financial stability D) Regular interest payments
Answer: C) To facilitate payment of interest and Answer: B) Ability to convert into common stock at
principal on incremental debt a discount
342. In the event of liquidation, how is senior debt 346. What effect does the conversion of convertible
prioritized compared to junior debt? bonds into new shares have on current
shareholders?
A) Senior debt has a lower priority claim
B) Senior debt has an equal priority claim A) Increases their ownership
C) Senior debt has a greater priority claim B) Has no effect on ownership
D) Senior debt has no priority claim C) Dilutes their ownership
D) Reduces the market value
Answer: C) Senior debt has a greater priority claim
Answer: C) Dilutes their ownership
343. How is unsecured debt categorized based on
whether it is subordinated or not?
A) By its overall creditworthiness

B) By its claim on assets
C) By its seniority in liquidation
D) By its correlation with cash flows
Answer: C) By its seniority in liquidation
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347. What determines the degree to which one D) Interest rates

debt issue is subordinate to another?
Answer: C) Numerical value
A) Bondholder preferences
B) Market demand
C) Constraints in the indenture 351. What is one factor credit-rating agencies
D) Coupon rate of the bonds consider when evaluating a company's risk?
Answer: C) Constraints in the indenture A) Future market trends

B) Debt as a percentage of total capital
C) CEO's personal preferences
348. What is an indenture in the context of long- D) Number of employees
term debt instruments?
Answer: B) Debt as a percentage of total capital
A) Bondholder's preference agreement
B) Contract between the corporation and lenders
C) Coupon rate negotiation 352. What is the purpose of assigning numerical
D) Market value estimation values to debt issues by credit-rating agencies?
Answer: B) Contract between the corporation and A) Determine market value

lenders B) Assess stock prices
C) Evaluate risk in comparison to other debt issues
D) Predict future interest rates
349. What does the indenture provide details
about? Answer: C) Evaluate risk in comparison to other
debt issues
A) Current stock prices
B) Form of the offering
C) Future interest rates
D) Stock market trends
Answer: B) Form of the offering
350. What do credit-rating agencies assign to each

debt issue based on the risk it poses?
A) Market value
B) Stock prices
C) Numerical value

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1

APP NAME: CAIIB WITH ASHOK, www.caiibwithashok.in

ALL THE VERY BEST FOR YOUR

SAMPLE QUESTION S FOR

ASHOK PANDEY (SENIOR MANAGER)

SI No. Topic Page No

CAIIB GENERAL INFORMATION

SI NO. Mandatory Paper Elective Papers: Candidates may select

2 Advanced Business & Risk Management

3 Banking Regulations and Information Technology & Digital Banking

4 Bank Financial Management Central Banking

 There will be 100 objective-type multiple-choice Question s on the Question paper,

 Negative points won't be awarded for incorrect responses.

 Exam Questions will include the following:

c. Logical and analytical explanation

 50 out of 100 is the minimum score required to pass the subject.

 The "Class of Pass" requirements:

 Deadline for Guidelines and Significant Developments Ahead of Exams:

 Important developments in banking and finance up to June 30th, as well as

MODULE C: VALUATION, MERGERS & ACQUISITIONS

 Discounted Cash Flow Valuation

 Estimating Inputs, Approaches to Discounted Cash Flow Models, Various

 Other Non-DCF valuation models

 Relative valuation model, Equity Valuation Multiples Model, , Enterprise

 Special cases of valuation

 Mergers, Acquisitions and Restructuring

o Types of Transactions, Reasons for Merger, Mechanics of a Merger, Costs and

CHAPTER 13 :- Corporate Valuations

6) What is the Weighted Average Cost of Capital

9) What is the expected growth rate (G) in A. 75(D):25(E)

10) What is the Dividend Pay-out for ANC A. Rs. 20,00,000

11) What is the Shareholder's Personal Tax Rate A. Rs. 20,00,000

12) What is the Current Market Price (MP) per A. 8.26%

13) What is the pattern of raising capital for ANC

17) How much is the Additional Equity raised by A. 16.27%

19) What is the Cost of Equity for ANC Limited in A. 8.26%

20) How is the Cost of Retained Earnings A. Rs. 20,00,000

21) What is the Weighted Average Cost of

25) What is Corporate Valuation? D. Number of outstanding shares.

A. It approximates the market capitalization.

A. They are praised for their efforts

48) Why is the concept of fair market value

51) What are the economic concepts that the

C. Relevant basis of value, premise of value, and

61) What criteria should be considered during

A. Historical stock prices and market trends

A. Adjusted Book Value Approach

71) In the context of the Adjusted Book Value a. $11.50

80) What is the total value of Share Capital on b. Inflation

84) What is mentioned as a potential cause for a

95) What is mentioned as a characteristic of Answer: b. It is the estimation of intrinsic

98) According to the passage, what does the

152) According to the passage, what is the

163) What is the fundamental tenet of a. Future cash flows

167) What is the value of money over time

179) Question 25. In the DCF approach, why is a

191) In Step 6, what is added to arrive at the

192) What is the terminal value used for in the

193) According to the passage, what is the final

CHAPTER 14:- Discounted Cash Flow Valuation

2. What is a characteristic of Dividend 5. What is the primary principle behind

14. How is the expression for the Constant b. Rs. 0.07

18. Growth Model formula, what is the fair