VALUATION – Maam Camu

QUIZZES

What is the major factor of the value of a business?

A. Intrinsic value

B. Fundamental analysts

C. Embedded risk

D. Chartists

Is the estimation of an asset's value based on variables perceived to be related to future investment
returns, on comparisons with similar assets, or, when relevant, on estimates of immediate liquidation
proceeds.

A. Businesses

B. Valuation

C. Fundamental equation

D. Future Prospects

Firm value is determined under the

A. Going Concern Value

B. Fair market Value

C. Intrinsic Value

D. Liquidation value

These are persons who are interested in understanding and measuring the intrinsic value of a firm.

A. Fundamental analysts

B. Activist investors

C. Chartists

D. Information traders
_ relies on the concept that stock prices are significantly influenced by how investors think and act

A. Fundamental analysts

B. Activist investors

C. Chartists

D. Information traders

What are the following activities can be performed through the use of valuation techniques?

A. Acquisition and Merger

B. spin-off and leveraged buyout

C. Stock selection and deducing market expectations

D. Supplier power and buyer power

What are the following business deals include the corporate events?

A. Valuation process

B. Industry rivalry

C. Synergy

D. Divestiture

What are the following important unique factors of valuation?

A. Synergy

B. Buyer power

C. Supplier power

D. Corporate finance

It refers to the nature and intensity of rivalry between market players in the industry

A. New Entrants

B. Substitutes and Complements

C. Buyer power

D. Industry rivalry
What are the following porter's five forces?

A. Focus

B. Revenues and gain

C. Forecasting financial performance

D. Supplier power

deals with prioritizing and distributing financial resources to activities that increases firm value

A. Forecasting financial performance

B. Corporate finance

C. Valuation process

D. Industry structure

E. Synergy

It refers to the inherent technical and economic characteristics of an industry and the trends that may
affect this structure.

A. Understanding of the business

B. Industry structure

C. Buyer power

D. Cost leadership

What are the two approaches of Forecasting Financial performance?

A. Top-down and bottom-up

B. Selecting and preparing

C. Sensitivity and situational

D. None of the above

It is a common methodology in valuation exercises wherein multiple analyses are done to understand
how changes in an input or variable will affect the outcome.
A. Scenario modeling

B. Applying valuation conclusion

C. Risk in valuation

D. Sensitivity analysis

What are the following is the key principles in valuation?

A. Risk in valuation

B. Value is impacted by liquidity

C. Situation adjustments

D. Providing recommendation

Which one is already on a going concern state?

a. Green fields investment

b. Blue fields investment

c. Brown fields investment

d. White fields investment

2. The one who suggested that risk management principles must be observed in doing businesses and
determining its value?

a. The Committee of Sponsoring Organization of the Treadway Commission

b. The Community of Sponsoring Organization of the Trea

c. The Council of Sponsoring Organization of the Treadway

d. The Committee of Risk Management Organization of

3. Expected to be realized within the company's normal operating cycle.

a. non-current asset

b. Current asset
c. non-current liability

d. Current liability

4. Expected to be settled BEYOND the entity's normal operating cycle.

A. non-current asset

b. Current asset

c. Non-current liability

d. Current liability

5. An estimate cost of reproducing, creating, developing or manufacturing a similar asset.

a. Depreciation Method

b. Valuation Method

c. Liquidation value method

d. Reproduction value method

6. A sensitive and confidential activity in portfolio management.

a. Valuation

b. Liquidation

c. Asset

d. Reproduction

7. Value shall be based on pure estimates.

a. Green fields investment

b. Blue fields investment

c. Brown fields investment

d. White fields investment

8. Theoretically, asset value is dependent on the it gives.

a, economic benefits

b. value

9. The is highly dependent on the value of the assets declared in the audited financial statements,
particularly the balance sheet or the statement of financial position.

a. Book value method

b. Valuation Method

c. Liquidation value method

d. Reproduction value method

10. Expected to be settled within the entity's normal operating cycle.

a. non-current asset

b. Current asset

c. non-current liability

d. Current liability

11. What must be divided to the difference of total assets and total liabilities to get net book value of
assets?

a. Number of outstanding shares

b. non-current liability

c. non-current asset

d. None of the above

12. Liquidation value method assumes that the reasonable value for the company to be purchased is the
amount which the investors will realize in the end of its life or the value of the it when it is terminated..

a. TRUE

b. FALSE

c. IT DEPENDS
d. NONE OF THE ABOVE

13. Green fields investment is a part of going concern business opportunities (GCBOs).

a. TRUE

b. FALSE

c. IT DEPENDS

d. NONE OF THE ABOVE

14. Cash and cash equivalents may be included in current assets only if it is not restricted

a. TRUE

b. FALSE

C. IT DEPENDS

d. NONE OF THE ABOVE

15. There are 3 factors that can affect the replacement value of asset.

a. TRUE

b. FALSE

C. IT DEPENDS

d. NONE OF THE ABOVE

LIQUIDATION BASED VALUATION QUIZ

1. For must companies, the value generated by working together and by human capital applied to
managing those assets, makes estimated going concern value greater than liquidation value

A Human
0. Workers

C. Assets

D. Equity

2. If there will be circumstances that occur which doubts the going-concern ability of a business, using
going-concern value may t be appropriate anymore as the future cash flows will not be realizable
anymore. An alternative approach is the use of

A. Accrual Banks

B. Liquidation value

C. Cash Basis

D. Dissolution Value

3. According to the CPA Institute, liquidation value refers to the and its assets are sold individually.

A True

B. False

4. Liquidation value represents the assets are sold piecemeal amount that can be gathered if the
business is shut down and its

A True

B. False

5. Once the date arrives and life is not extended, due process takes place to end the life of the
corporation and start the liquidation process.

A. Business Failure

B. Corporate or Project End of Life

C. Depletion of Scarce Resources

D. None of the above

6. if corporate end of life is already certain, it is more appropriate to compute terminal value using
liquidation value
A. Business Failure

B. Corporate or Project End of Life

C. Depletion of Scarce Resources

D. None of the above

7. Once the contract with the government expires or scarce resource become fully depleted and no new
site is prepared to support operation, this might signal potential liquidation and valuation should be
based on liquidation value

A. Business failure

B. Corporate or Project End of Life

C. Depletion of Scarce Resources

D. None of the above

8. The most common reason why businesses close or liquidate. Early symptoms of business failure are
low or negative returns

A. Business Failure

B. Corporate or Project End of Lide

C. Depletion of Scarce Resources

D. None of the above

9. When left unresolved, this may lead to insolvency or even bankruptcy.

A. Business Failure

B. Corporate or Project End of Life

C. Depletion of Scarce Resources

D. None of the above

10. Government regulation often requires that companies seek approval from the government prior to
commencement of operations

A. Business Failure

B. Corporate or Project End of Life

C. Depletion of Scarce Resources

D. None of the above

11. Liquidation value is the most conservative valuation approach among all as it considers the realizable
value of the asset if it is sold now based on current conditions.

A. True

B. False

12. Liquidation valuation must not be used if the business continuity is dependent on current

A. True

B. False

13. Liquidation value can be further computed on a per share basis by dividing total liquidation value by
outstanding ordinary share, Liquidation value per share should be considered together with other
quantitative (e.g. current share price, going concern DCF) and qualitative metrics to justify business
decisions to be made

A. True

B. False

14. Assets are sold strategically over an orderly period to attract and generate the most money for the
assets is known to be a proper liquidation.

A true

B. False

15. Liquidation process, at which the asset or assets are sold as quickly as possible, This is known as at an
auction.

A. Orderly Liquidation

B. Proper Liquidation

C. Forced Liquidation

D. Fast Liquidation
Decline in properties valuation due to physical depreciation is?

A. Physical Obsolescence

B. Functional Obsolescence

C. Economical Obsolescence

D. Market Obsolescence

Salvage is

A. Selling price

B. Resale price

C. Cost price

D. Rent price

Which of the following is not a valuation purpose?

A. Taxation of the property

B. Value of the property

C. Buying and selling of the property

D. Insurance

The of the building is calculated by finding the present-day cost of the building and allowing a suitable

A. Qualification, Appreciation

B. Generation. Depreciation

C. Valuation Depreciation

D. Evaluation, Appreciation
Calculate the years purchase for a property of useful life of 30 years and the rate of interest of 5% per
annum. The rate of interest for the sinking fund is 3%

A. 12.5

B. 14

C. 17

D. 22

The total area of floor in-between walls and consists of floor of all rooms. verandahs passages, corridors,
stair case, entrance halls, kitchen, stores, bath and latrines is known as

A. Circulation area

B. pinch area

C. floor area

D. carpet area

A building has been purchased by a person at a cost of Rs. 25,000. The useful life of the building is 40
years and the scrap value of the building is Rs. 3.000. Calculate the annual sinking fund (Rs.) at the rate
of 5% interest. (Take 1.050 7.04)

A. 136

B. 155

C. 182

D. 207

For estimation of painting area of corrugated steel sheets, percentage increase in above the plain areas

A. 10%

B. 14%
C. 20%

D. 25%

An old building has a future life of 15 years. The rate of interest on capital is 7% If the coefficient of the
annual sinking fund is 0.43, then what will be the value of the year's purchase?

A. 3

B. 4

C. 2

D. 2.36

If a large piece of land is required to be divided into plots after providing roads. parks, etc., which
method of valuation is suitable?

A. Valuation based on cost

B. Valuation based on profit

C. Belting method of valuation

D. Development method of valuation

The area between the walls is called

A. carpet area

B. circulation area

C. Plinth area

D. Floor area

Bill wants to buy a real estate investment from which he can expect an 8% cap rate. If the net operating
income from a certain property is $6500 per year, what is the value to Bill of the home using the direct
capitalization method?
A. $81,250

B. $52.000

C. $78,000

D. $84,500

13 What is the gross income multiplier of a house that rents for $1,200 each month and would sell for
$150,000?

a. 10.4

b. 125

C. 8%

D. 13

The income approach to property valuation is useful for what kind of buyer?

A. First came home buyer

B. Rental real estate investor

C. Flipper

D. Retirees

15 For which property is the income approach preferred in estimating the market value of a property?

A. For a single family home

B. For the family farm

C. For a large factory

D. For a strip shopping mall

TRUE OR FALSE

FALSE 1. There are two levels of cash which is for the firm and equity

TRUE 2. NCFF refers to the cash flow available to the parties who supplied capital

TRUE 3. NCFE refers to cash available for common equity participants or shareholders only after paying
operating expenses

FALSE 4. The Net Cash Flows to the Firm is the amount made available to both debt and equally claims
against the company.

TRUE 5. EBITDA or Earnings Beling Interest, Taxes, Depreciation and Amortization pertains to income

II. Choose the correct Answer

1.Estimate divided by the cost of capital less the growth rate.

A. Liquidation Value

B. Scientific Estimates

C. Estimated Perpetual Value

D. Constant Growth

2. In lieu of the required return, they use the growth rate as the proxy especially if the growth is constant
and significant.

A. Liquidation Value

B. Scientific Estimates

C. Estimated Perpetual Value

D. Constant Growth

3. Other valuators especially those with vast experience already in some types of investments uses other
basis for them to determine the reasonable terminal value.

A. Liquidation Value
B. Scientific Estimates

C. Estimated Perpetual Value

D. Constant Growth

4. Challenges for some valuators is to determine the amount of required return for a specific type of
asset or investment.

A. Liquidation Value

B. Scientific Estimates

C. Estimated perpetual value

D. Constant growth

5. Some analysts find that the terminal value be based on the estimated salvage value of the assets.

A. Liquidation Value

B. Scientific Estimates

C. Estimated Perpetual Value

D. Constant Growth

III. As a quick guide in developing a financial model the following components are recommended which
are those?

Title Page

Assumption Sheet

Data Key Results

Pro-forma Financial Statement

Supporting Schedules
1. What is the primary goal of due diligence in valuation?

A) To assess market trends

B. To verify financial information

C) To enhance sales techniques

D) To determine employee satisfaction

2. The cost method of valuation primarily focuses on which of the following?

A) Future cash flows

B. Replacement cost of assets

C) Market comparables

D) Earnings potential

3. Which of the following is NOT typically considered during the due diligence process?

A) Financial statements

B. Intellectual property

C) Employee turnover rates

D) Market share

4. In the cost method, the term "replacement cost" refers to:

A) The price of new assets

B. The cost of similar assets

C) The cost to replace an asset in its current state

D) The liquidation value of an asset

5. What type of asset is most commonly evaluated using the cost method?
A) Intangible assets

B. Real estate

C) Financial securities

D) Brand equity

6. Which of the following is a key component of assessing replacement cost?

A) Market demand

B. Depreciation

C) Gross margins

D) Competitive analysis

7. Due diligence may include which of the following analyses?

A) SWOT analysis

B. PEST analysis

C) Both A and B

D) None of the above

8. Which financial statement is most relevant during the due diligence process?

A)Balance sheet

B. Income statement

C) Cash flow statement

D) All of the above

9. In due diligence, the "cost approach" can help identify:

A) Underpricing of assets

B. Future earnings potential

C) Actual costs incurred

D) None of the above

10. What is the main limitation of the cost method?

A) It ignores market conditions

B. It is too complex

C) It only focuses on tangible assets

D) It overestimates replacement costs

11. Which of the following can affect the replacement cost of an asset?

A) Technological changes

B. Inflation rates

C) Regulatory changes

D) All of the above

12. During due diligence, what is During market trends essential to verify regarding fixed assets?

A) Current

B. Condition and valuation

C) Employee opinions

D) Customer satisfaction

13. The term "economic obsolescence" refers to:

A) A decrease in asset value due to physical deterioration

B. A decrease in value due to external factors.

C) A temporary decline in market

D) None of the above

14. Which of the following is most likely to be included in the due diligence report?

A) Future marketing strategies

B. Valuation methodology

C) Employee satisfaction surveys

D) Customer demographics

15. A thorough due diligence process helps to:

A) Increase the sales price

B. Minimize risks

C) Ensure compliance

D) All of the above

1. Offers the view of business market value that is both easy to graps and straightforward to apply.

a comparative private company

b. empirical approach

c. market value approach

2. Other literature called this as guideline transaction method or comparative business sales data

a. comparative private company

b. empirical approach

c. market value approach

3. Generally uses research and data base processing in order to come up with conclusion.

a. comparative private company

b. empirical approach

C. market value approach

4. It will require careful data selection, analysis and consistent data reporting standards

a. True

b. False

c. None of the above

5. Comparative data includes sales of small businesses that can be similar to the small business being
valued

a. True

b. False

c. None of the above

6. Involves identifying a comparable company and obtaining the stock price for the company's listed
security

a. True

b. False

c. None of the above

7. Are required to file their financial statement electronically with the Securities and Exchange
Commission (SEC)
a. Guideline public company data

b. comparable company analysis

c. publicly listed companies (PCLs)

8. Involves looking up historical transactions in securities of the business under valuation. The valuation
might be for minority stake such as historical stock quote from a listed stock exchange or it might be for a
majority stake such as merger and acquisition transaction involving the business.

a. comparative company analysis

b. market value approach c. prior transaction method

9. Is a technique that uses relevant drivers for growth and performance that can be used as proxy to set
a reasonable estimate for the value of an asset or investment prospective.

a. comparative company analysis

b. guideline public company data

c. comparative private company sales data

10. Represents that relationship of the market value per share and the earnings per share

a. book to market ratio

b. price-earnings ratio

c. dividend yield ratio

11. is used to determine the appreciation of the market to the value of the company as compared to the
value it reported under its statement of financial position

a. book to market ratio

b. price-earnings ratio
c. dividend yield ratio

12. Describes the relationship between the dividends received per share and the appreciation of the
market on the price of the company.

a. book to market ratio

b. price-earnings ratio

c. dividend yield ratio

13. EBITDA means

a. Earnings before interest, taxes deficit and amortization

b. Earnings before interest, taxes, depreciation and amortization

c. Earnings before interest, taxes, discount and amortization

14. In this method, analysts use business pricing formulas that are developed based on the expert
opinion of professionals involved in business sales.

a. prior transaction method

b. EBITDA multiple

c. Heuristic pricing rules method

15. Represents for the net amount of revenue after deducting operating expenses and before deducting
financial fixed costs, taxes and non-cash expenses

a. prior transaction method

b. EBITDA multiple

c. Heuristic pricing rules method

1. Which valuation method involves comparing a company to similar companies in the same industry?

A) Discounted Cash Flow (DCF)

B. Comparable Company Analysis

C) Precedent Transactions

D) Asset-Based Valuation

2. What is the primary focus of the Discounted Cash Flow (DCF) method?

A) Historical sales data

B. Future cash flows

C) Market share

D) Shareholder equity

3. In which valuation method are past transactions of similar companies used as benchmarks?

A) DCF Analysis

B. Comparable Company Analysis

C) Precedent Transactions

D) Liquidation Value

4. Which valuation method considers the total net asset value of a company?

A) Market Capitalization

B. Asset-Based Valuation

C) Earnings Before Interest and Taxes (EBIT)

D. Price-to-Earnings Ratio (PE)

5. Which of the following is NOT a typical driver of value in DCF analysis?

A) Revenue Growth Rate

B. Discount Rate

C) Market Capitalization

D. Terminal Value

6. What is typically included in the calculation of terminal value in DCF?

A) Current liabilities

B. Free cash flows beyond the projection period

C) Depreciation

D) Interest expenses

7. Which metric is often used in Comparable Company Analysis to determine value?

A) Return on Equity (ROE)

C) Dividend Yield

D) Gross Margin

B. Price-to- Earnings

8. In an acquisition, what is the term for the premium paid over the market value of a target company?

A) Synergy

B. Control Premium

C) Fair Market Value

D) Goodwill

9. What is the main purpose of performing a sensitivity analysis in a DCF model?

A) To find competition

B. To gauge how changes in assumptions affect valuation.

C) To estimate liquidation value

D) To predict stock price movements

10. Which valuation approach is most appropriate when valuing a startup company with

little to no revenue?

A. DCF

B.Comparable Company Analysis

C) Precedent Transactions

D. Scorecard Valuation

11. What does EBITDA stand for, and why is it important in M&A?

A) Earnings Before Interest, Taxes, Depreciation, and Amortization it's a measure of profitability

B. Earnings Before Interest, Taxes, Depreciation, and Assets; it reflects asset

value

C) Earnings Before Interest. Taxes, Discounts, and Amortization, it shows cash flow.

D) Farmings Before Investment. Taxes, Depreciation, and Assets; it's med for budgeting.

12. What is goodwill in the contest of M&A?

A) The value of physical assets

B. The difference between the purchase price and fair market value of identifiable

D) The net present value of future earnings

C) A measure of cash flow

13. Which of the following is a disadvantage of using DCF analysis?

A) It considers the time value of money.

B. It relies heavily on future cash flow projections.

C) It is easy to compare with other companies.

D) It reflects the market conditions.

14. What is the primary benefit of using the Comparable Company Analysis method?

A) It provides a precise valuation.

B. It uses readily available market data.

C) It accounts for future growth.

D) It eliminates subjectivity

15. Which valuation method would likely be most influenced by the market's perception of future
growth potential?

A) Asset-Based Valuation

B. DCF Analysis

C) Precedent Transactions

D) Liquidation Value