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14 Review

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0% found this document useful (0 votes)
15 views167 pages

14 Review

Uploaded by

acepadiernos888
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Synchronous

meeting
11.8&9.2021
2 pts
This is the rate used to compute the present value factor in
valuing long term debt security?
a. Coupon rate
b. Stated rate
c. Effective interest rate
d. Nominal interest rate
C
This is the rate used to compute the present value factor in
valuing long term debt security?
a. Coupon rate
b. Stated rate
c. Effective interest rate
d. Nominal interest rate
2 pts
The cost of source of fund that considers the effect of
compounding is:
a. Coupon rate
b. Stated rate
c. Annual percentage rate
d. Annual percentage yield
D
The cost of source of fund that considers the effect of
compounding is:
a. Coupon rate
b. Stated rate
c. Annual percentage rate
d. Annual percentage yield
2 pts
This is the rate used to compute the amount periodic interest
payment on a long-term debt security?
a. Discount rate
b. Yield to maturity
c. Effective interest rate
d. Nominal discount rate
D
This is the rate used to compute the amount periodic interest
payment on a long-term debt security?
a. Discount rate
b. Yield to maturity
c. Effective interest rate
d. Nominal discount rate
2 pts
This is the cost of source of fund that does not considers the
effect of compounding is:
a. Yield to call
b. Effective interest rate
c. Annual percentage rate
d. Annual percentage yield
C
This is the cost of source of fund that does not considers the
effect of compounding is:
a. Yield to call
b. Effective interest rate
c. Annual percentage rate
d. Annual percentage yield
2 pts
This is the payment on a long-term debt security?
a. Discount rate
b. Yield to maturity
c. Effective interest rate
d. Nominal interest rate
D
This is the payment on a long-term debt security?
a. Discount rate
b. Yield to maturity
c. Effective interest rate
d. Nominal interest rate
1 pt
Value pertains to how much a particular object is worth to a
particular set of eyes.
TRUE
Value pertains to how much a particular object is worth to a
particular set of eyes.
1 pt
Methods to value for real estate can be different on how to
value an entire business.
TRUE
Methods to value for real estate can be different on how to
value an entire business.
1 pt
Businesses treat capital as scarce resources that they should
compete to obtain and efficiently manage.
TRUE
Businesses treat capital as scarce resources that they should
compete to obtain and efficiently manage.
1.5 pts
Valuation places great emphasis on the _____ that are
associated in the exercise.
a. Human reasoning
b. Professional skepticism
c. Professional judgement
d. Due diligence
C
Valuation places great emphasis on the _____ that are
associated in the exercise.
a. Human reasoning
b. Professional skepticism
c. Professional judgement
d. Due diligence
1.5 pts
The value of a business can be basically linked to three major
factors, except:
a. Current operations
b. Future prospects
c. Embedded risks
d. None of the above
D
The value of a business can be basically linked to three major
factors, except:
a. Current operations
b. Future prospects
c. Embedded risks
d. None of the above
1.5 pts
______ refers to the possible range of values where the real
firm lies.
a. Risk of the unknown
b. Volatility
c. Uncertainty
d. Value
C
______ refers to the possible range of values where the real
firm lies.
a. Risk of the unknown
b. Volatility
c. Uncertainty
d. Value
1 pt
Value is defined at a period of time.
FALSE
Value is defined at a period of time.
1 pt
Value is influenced by transferability of present value of cash
flows.
FALSE
Value is influenced by transferability of present value of cash
flows.
1.5 pts
General term which describes the transaction two companies
combined to form a wholly new entity.
A. Mergers
B. Acquisitions
C. Divestiture
D. Spin-off
A
General term which describes the transaction two companies
combined to form a wholly new entity.
A. Mergers
B. Acquisitions
C. Divestiture
D. Spin-off
1.5 pts
Sale of a major component or segment of a business (e.g.
brand or a product line) to another company.
A. Mergers
B. Acquisitions
C. Divestiture
D. Spin-off
C
Sale of a major component or segment of a business (e.g.
brand or a product line) to another company.
A. Mergers
B. Acquisitions
C. Divestiture
D. Spin-off
1 pt
If no comparable assets found in the market, it is more
appropriate to use reproduction value method.
TRUE
If no comparable assets found in the market, it is more
appropriate to use reproduction value method.
1.5 pts
This refers to the value recorded in the accounting books of a
firm as reflected in the audited financial statements.
A. Exit value
B. Book value
C. Earnings per share
D. Fair market value
B
This refers to the value recorded in the accounting books of a
firm as reflected in the audited financial statements.
A. Exit value
B. Book value
C. Earnings per share
D. Fair market value
1.5 pts
When determining replacement costs of an asset, valuators
tend to consult with ______.
A. Actuaries
B. Board of Directors
C. Appraisers
D. Equity Analysts
C
When determining replacement costs of an asset, valuators
tend to consult with ______.
A. Actuaries
B. Board of Directors
C. Appraisers
D. Equity Analysts
1.5 pts
When computing for book value, which of the following items
should be deducted the asset value?
A. Ordinary Share Capital
B. Total SHE
C. Long-term debt only
D. Total liabilities
D
When computing for book value, which of the following items
should be deducted the asset value?
A. Ordinary Share Capital
B. Total SHE
C. Long-term debt only
D. Total liabilities
1 pt
Brown field investment is the term used to describe
businesses that are starting from scratch.
FALSE
Brown field investment is the term used to describe
businesses that are starting from scratch.
1 pt
For real properties, it is more important to look at the age of
the asset than its size.
FALSE
For real properties, it is more important to look at the age of
the asset than its size.
1 pt
Bird-in-hand theory is also known as dividend relevance
theory developed by Miller and Lintner.
FALSE
Bird-in-hand theory is also known as dividend relevance
theory developed by Miller and Lintner.
1 pt
Precedent transactions are previous deals or experiences that
can be similar with the investment being evaluated.
TRUE
Precedent transactions are previous deals or experiences that
can be similar with the investment being evaluated.
1 pt
WACC may also include other sources of financing like
preferred stock and retained earnings.
TRUE
WACC may also include other sources of financing like
preferred stock and retained earnings.
1 pt
EVA is the excess of company’s earnings after deducting the
cost of capital.
TRUE
EVA is the excess of company’s earnings after deducting the
cost of capital.
1.5 pts
The _________ is a calculation of a firm’s ________ in which
each category of _________ is proportionately weighted.
a. WACC; Capital; Cost of Capital
b. WACC; Cost of Capital; Capital
c. Cost of Capital; WACC; Capital
d. Cost of Capital; Capital; WACC
B
The _________ is a calculation of a firm’s ________ in which
each category of _________ is proportionately weighted.
a. WACC; Capital; Cost of Capital
b. WACC; Cost of Capital; Capital
c. Cost of Capital; WACC; Capital
d. Cost of Capital; Capital; WACC
1.5 pts
A key factor that is used to discount the net cash flows in the
future.
a. Cost of equity
b. Cost of earnings
c. Cost of debt
d. Cost of capital
D
A key factor that is used to discount the net cash flows in the
future.
a. Cost of equity
b. Cost of earnings
c. Cost of debt
d. Cost of capital
1.5 pts
In sensitivity analysis, this factor will reduce value if there are
future circumstances that will affect the firm negatively.
a. Earning accretion
b. Net loss
c. Liquidation
d. Earning dilution
D
In sensitivity analysis, this factor will reduce value if there are
future circumstances that will affect the firm negatively.
a. Earning accretion
b. Net loss
c. Liquidation
d. Earning dilution
1 pt
Insolvency happens when a company cannot pay liabilities as
they come due.
TRUE
Insolvency happens when a company cannot pay liabilities as
they come due.
1 pt
Liquidation value represents the net amount that can be
gathered if the business is shut down and its assets are sold
piecemeal.
TRUE
Liquidation value represents the net amount that can be
gathered if the business is shut down and its assets are sold
piecemeal.
1 pt
Liquidation is also called as net asset value.
TRUE
Liquidation is also called as net asset value.
1 pt
Business failure is the most common reason why businesses
close or liquidate.
TRUE
Business failure is the most common reason why businesses
close or liquidate.
1 pt
Divestment can be driven by different internal factors such as
mismanagement, poor financial evaluation and decisions,
failure to execute strategic plans, inadequate cash flow
planning or failure to manage working capital.
FALSE
Divestment can be driven by different internal factors such as
mismanagement, poor financial evaluation and decisions,
failure to execute strategic plans, inadequate cash flow
planning or failure to manage working capital.
1.5 pts
This is the situation where liquidation value is considered
when the number of years the company can operate is not
extended particularly when the primary objective is reach like
in cases of partnership and joint ventures.
a. Business failures
b. Divestment
c. Corporate end of life
d. Depletion of scarce resources
C
This is the situation where liquidation value is considered
when the number of years the company can operate is not
extended particularly when the primary objective is reach like
in cases of partnership and joint ventures.
a. Business failures
b. Divestment
c. Corporate end of life
d. Depletion of scarce resources
1 pt Discounted cash flows analysis is
meticulous but more conservative
method or approach that can be used
to determine the asset value for it
clearly demonstrate the movement of
the transactions.
TRUE Discounted cash flows analysis is
meticulous but more conservative
method or approach that can be used
to determine the asset value for it
clearly demonstrate the movement of
the transactions.
1 pt
There are three levels of net cash flows:
1. Net cash flows to the firm
2. Net cash flows to the creditors
3. Net cash flow to the equity
FALSE
There are three levels of net cash flows:
1. Net cash flows to the firm
2. Net cash flows to the creditors
3. Net cash flow to the equity
1 pt
Financial modelling is a sophisticated
and confidential activity in a company
of for an analyst.
TRUE
Financial modelling is a sophisticated
and confidential activity in a company
of for an analyst.
These are business opportunities that
1 pt has long-term to infinite operational
period.
a. Going Concern Business
Opportunities
b. Perpetual Business Opportunities
c. Stable Business Opportunities
d. Strategic Business Opportunities
These are business opportunities that
A has long-term to infinite operational
period.
a. Going Concern Business
Opportunities
b. Perpetual Business Opportunities
c. Stable Business Opportunities
d. Strategic Business Opportunities
1 pt This represents the value of the
company in perpetuity or in a going
concern environment.
a. Terminal value
b. Salvage value
c. Perpetuity value
d. Infinity value
A This represents the value of the
company in perpetuity or in a going
concern environment.
a. Terminal value
b. Salvage value
c. Perpetuity value
d. Infinity value
DCF Analysis is the most applicable to
2 pts use when the following are available,
except:
a. Validated operational and financial
information
b. Reasonable appropriated cost of
capital or required rate of return
c. Cash flow pricing multiples
d. New quantifiable information
DCF Analysis is the most applicable to
C use when the following are available,
except:
a. Validated operational and financial
information
b. Reasonable appropriated cost of
capital or required rate of return
c. Cash flow pricing multiples
d. New quantifiable information
2 pts
In market approach, the values may be
known because these companies are
publicly traded or because they were
recently sold, and the terms of the
transaction were disclosed.
True
In market approach, the values may be
known because these companies are
publicly traded or because they were
recently sold, and the terms of the
transaction were disclosed.
2 pts
Heuristic Pricing Model uses expert
opinions of professional teachers.
True
Heuristic Pricing Model uses expert
opinions of professional teachers.
2 pts
The advantage of this Guideline Public
Company Data is that there are plenty
of transaction data available from the
public capital markets.
True
The advantage of this Guideline Public
Company Data is that there are plenty
of transaction data available from the
public capital markets.
2 pts
Comparative Private Company Sales
Data is formerly known as Comparative
Transaction Method.
True
Comparative Private Company Sales
Data is formerly known as Comparative
Transaction Method.
2 pts This ratio represents the relationship of
the market value per share and the
earnings per share.
a. Price Earnings Ratio
b. Market Value to Book Ratio
c. Book to Market Ratio
d. EBITDA Ratio
A This ratio represents the relationship of
the market value per share and the
earnings per share.
a. Price Earnings Ratio
b. Market Value to Book Ratio
c. Book to Market Ratio
d. EBITDA Ratio
The following are all advantages of
Guideline Public Method, except for:
2 pts a. Plenty of transaction data available
from the public capital markets
b. Business sales data reporting is
generally consistent and reliable
c. Business financial reporting data are
readily available
d. Data generally involves sales of non-
controlling business ownership
interest
The following are all advantages of
Guideline Public Method, except for:
D a. Plenty of transaction data available
from the public capital markets
b. Business sales data reporting is
generally consistent and reliable
c. Business financial reporting data are
readily available
d. Data generally involves sales of non-
controlling business ownership
interest
1 pt
The core elements of value creation are analyzing ROIC and
revenue growth.
TRUE
The core elements of value creation are analyzing ROIC and
revenue growth.
1 pt
ROIC is better analytical tool than return on
equity (ROE) or return on assets (ROA) for
understanding the company’s performance.
TRUE
ROIC is better analytical tool than return on
equity (ROE) or return on assets (ROA) for
understanding the company’s performance.
1 pt
Liquidity ratio evaluates the ability of a
corporation to pay long term obligations as they
come due.
FALSE
Liquidity ratio evaluates the ability of a
corporation to pay long term obligations as they
come due.
1 pt
Current ratio is current assets after deducting
current liabilities.
FALSE
Current ratio is current assets after deducting
current liabilities.
1 pt
Acid test ratio is also known as cash* ratio.
FALSE
Acid test ratio is also known as cash* ratio.
1 pt
In the financial world, due diligence requires an examination
of legal records before entering into a proposed transaction
with another party.
TRUE
In the financial world, due diligence requires an examination
of legal records before entering into a proposed transaction
with another party.
1 pt
Soft due diligence is concerned with the legal and financials
of the company under evaluation.
FALSE
Soft due diligence is concerned with the legal and financials
of the company under evaluation.
1 pt
Due diligence became a common practice in the U.S.A. with
the passage of the Securities Act of 2000.
FALSE
Due diligence became a common practice in the U.S.A. with
the passage of the Securities Act of 2000.
1 pt
The reasoning behind M&A generally given is that two
separate companies together create more value compared to
being on an individual stand.
TRUE
The reasoning behind M&A generally given is that two
separate companies together create more value compared to
being on an individual stand.
1.5 pts
Which of the following can do Due Diligence?
a. Individual investor
b. Acquiring companies
c. Companies being acquired
d. All of the above
D
Which of the following can do Due Diligence?
a. Individual investor
b. Acquiring companies
c. Companies being acquired
d. All of the above
1.5 pts
Which of the following is not a type or form of merger?
a. Merger through absorption
b. Merger through consolidation
c. Short form merger
d. Long form merger
D
Which of the following is not a type or form of merger?
a. Merger through absorption
b. Merger through consolidation
c. Short form merger
d. Long form merger
1.5 pts
A business strategy wherein a company’s division or unit is
separated and made into an independent company.
a. Partial sell-offs
b. Spin-off
c. Split-off
d. Equity carve-out
B
A business strategy wherein a company’s division or unit is
separated and made into an independent company.
a. Partial sell-offs
b. Spin-off
c. Split-off
d. Equity carve-out
1 pt
Financial markets are where physical assets such as stocks
and bonds are issued and traded.
FALSE
Financial markets are where physical assets such as stocks
and bonds are issued and traded.
1 pt
In private market, the contracts between two persons are
with standardized feature making it available for trade.
FALSE
In private market, the contracts between two persons are
with standardized feature making it available for trade.
1 pt
Capital markets involve instruments with maturities of longer
than one year.
TRUE
Capital markets involve instruments with maturities of longer
than one year.
1 pt
Financial environments are factors and situations that
primarily affect the operating aspects of the corporation.
FALSE
Financial environments are factors and situations that
primarily affect the operating aspects of the corporation.
1 pt
Spot market is a market where assets or goods are delivered
today and the price of the said assets is determined today.
TRUE
Spot market is a market where assets or goods are delivered
today and the price of the said assets is determined today.
1 pt
Treasury bonds are long term debt securities issued by the
corporation which provides for a fixed interest income for
more than 10 years.
TRUE
Treasury bonds are long term debt securities issued by the
corporation which provides for a fixed interest income for
more than 10 years.
1 pt
Initial Public Offering is the first time offering of closely held
company’s stocks to the public.
TRUE
Initial Public Offering is the first time offering of closely held
company’s stocks to the public.
1 pt
A transfer of securities through an intermediary in which the
investors will be holding the securities of the issuing
corporation is an indirect transfer through investment bank.
FALSE
A transfer of securities through an intermediary in which the
investors will be holding the securities of the issuing
corporation is an indirect transfer through investment bank.
1 pt
An example of spot market transaction is buying of foreign
currency using the forward rate.
FALSE
An example of spot market transaction is buying of foreign
currency using the forward rate.
1 pt
Stocks and bonds are financial assets of the firm which are
issued to raise capital that will finance the firm’s operating
and investing activities.
TRUE
Stocks and bonds are financial assets of the firm which are
issued to raise capital that will finance the firm’s operating
and investing activities.
1 pt
Preferred stocks compared to common stocks have
preferential and voting rights.
FALSE
Preferred stocks compared to common stocks have
preferential and voting rights.
1 pt
If the stock’s intrinsic value is greater than the market value,
the stock is deemed as overvalued.
FALSE
If the stock’s intrinsic value is greater than the market value,
the stock is deemed as overvalued.
1 pt
If the stock is undervalued, it is a good buy for investors
because the intrinsic value is lower than the market value.
FALSE
If the stock is undervalued, it is a good buy for investors
because the intrinsic value is lower than the market value.
1 pt
The terminal value of a non-constant growth stock should be
discounted using which of the last period (year) of the non-
constant growth phase.
TRUE
The terminal value of a non-constant growth stock should be
discounted using which of the last period (year) of the non-
constant growth phase.
1.5 pts
Complete the sentence: The marginal investor is an investor
who is at the margin and would be willing to ___ if the stock
price was slightly lower or to sell if the price was slightly ___.
a. Sell; lower
b. Hold; higher
c. Buy; higher
d. Buy; lower
C
Complete the sentence: The marginal investor is an investor
who is at the margin and would be willing to ___ if the stock
price was slightly lower or to sell if the price was slightly ___.
a. Sell; lower
b. Hold; higher
c. Buy; higher
d. Buy; lower
1 pt
Bond is a long-term contract which provides that the holder
of this instrument will receive coupon payment, each year
until its maturity date and principal payment, on the said
maturity date.
TRUE
Bond is a long-term contract which provides that the holder
of this instrument will receive coupon payment, each year
until its maturity date and principal payment, on the said
maturity date.
1 pt
A bond that is issued by a foreign corporation is a foreign
bond which is subject to default risk.
TRUE
A bond that is issued by a foreign corporation is a foreign
bond which is subject to default risk.
1 pt
If the coupon interest rate (nominal rate) is greater than yield
to maturity (YTM), the bond is priced lower than face value.
FALSE
If the coupon interest rate (nominal rate) is greater than yield
to maturity (YTM), the bond is priced lower than face value.
1 pt
The yield to maturity (YTM) is the rate of return the investor
will receive if he intends to hold the bond until it matures
irrespective of the increase or decrease in the market rates.
TRUE
The yield to maturity (YTM) is the rate of return the investor
will receive if he intends to hold the bond until it matures
irrespective of the increase or decrease in the market rates.
1 pt
The yield to call is the rate of return earned on a bond when it
is called before its maturity date.
TRUE
The yield to call is the rate of return earned on a bond when it
is called before its maturity date.
1.5 pts
This is a kind of bond that is exchangeable at the option of
the bondholder for the issuing company’s common stock?
a. Bond with put provision
b. Bond with warrant
c. Callable bond
d. Convertible bond
D
This is a kind of bond that is exchangeable at the option of
the bondholder for the issuing company’s common stock?
a. Bond with put provision
b. Bond with warrant
c. Callable bond
d. Convertible bond
1.5 pts
If the YTM is greater than the coupon or stated interest rate:
a. The bond is issued at a premium
b. The bond is issued at a discount
c. The bond price will not change as it reaches its maturity
d. The bond price decreases as it reaches maturity
B
If the YTM is greater than the coupon or stated interest rate:
a. The bond is issued at a premium
b. The bond is issued at a discount
c. The bond price will not change as it reaches its maturity
d. The bond price decreases as it reaches maturity
1.5 pts
A 10-year corporate bond has an annual coupon payment of
9%. The bond is currently selling at par (P1,000). Which of the
following statements is correct?
a. The bond’s yield to maturity is 9%
b. The bond’s current yield is 9%
c. If the bond’s yield to maturity remains constant, the
bond’s price will remain at par
d. All of the statements above are correct
D
A 10-year corporate bond has an annual coupon payment of
9%. The bond is currently selling at par (P1,000). Which of the
following statements is correct?
a. The bond’s yield to maturity is 9%
b. The bond’s current yield is 9%
c. If the bond’s yield to maturity remains constant, the
bond’s price will remain at par
d. All of the statements above are correct
1.5 pts
Issuing company generally will exercise its rights to call the
bonds when the interest rates in the market?
a. Remain the same
b. Increase
c. Decrease
d. No correlation between interest and call provision
C
Issuing company generally will exercise its rights to call the
bonds when the interest rates in the market?
a. Remain the same
b. Increase
c. Decrease
d. No correlation between interest and call provision
1.5 pts
If the bond’s YTM is higher than the nominal interest rate, the
price will _________, as it reaches the maturity”
a. Remain the same
b. Increase
c. Decline
d. No correlation between price and maturity
B
If the bond’s YTM is higher than the nominal interest rate, the
price will _________, as it reaches the maturity”
a. Remain the same
b. Increase
c. Decline
d. No correlation between price and maturity

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