Practice Test

Q1) A _______ valuation is an examination conducted towards rendering an estimate or opinion as to the fair market value of a business interest at a given point in time. Show Answer

Q2) _______ value is the accounting record value of assets that is shown in the balance sheet. Show Answer

Q3) _______ value is the value at which an asset or a security of a company can be sold in the market. Show Answer

Q4) ______ value can be applied to tangible assets only because intangible assets cannot be sold generally Show Answer

Q5) The ______ value of all the incremental future cash flows can be termed as the intrinsic value Show Answer

Q6) The _______ value is arrived by discounting the incremental cash flows at an appropriate discount rate. Show Answer

Q7) ______ value represents the price at which each individual asset can be sold in the event of liquidation of business. Show Answer

Q8) The maximum price at which a business can be acquired is the _______ value Show Answer

Q9) _____ value is the cost of purchasing or replacing a new asset which is of equal utility to the business. Show Answer

Q10) ______ value is generally applied to tangible assets like equipment, plant etc. Show Answer

Q11) _____ value is the sale value of an old asset after its usage. Show Answer

Q12) _____ value is the average of the market value, book value and the intrinsic value Show Answer

Q13) Under Net Asset Value method value of shares are depends on _____________. Show Answer

Q14) Fair value of the shares is equal to _________ Show Answer

Q15) Valuations are highly subjective calculations that aim to determine the fair market value of a company. Show Answer

Q16) A business valuation is an examination conducted towards rendering an estimate or opinion as to the fair market value of a business interest at a given point of time. Show Answer

Q17) Market value is the accounting record value of assets that is shown in the balance sheet. Show Answer

Q18) Book value is the value at which an asset or a security of a company can be sold in the market. Show Answer

Q19) Market value can be applied to tangible assets only because intangible assets cannot be sold generally Show Answer

Q20) The total market value of all the outstanding equity shares as quoted in the stock market can be referred as the market value of a business. Show Answer

Q21) Market value can be ascertained for listed corporate only. Show Answer

Q22) The present value of all the incremental future cash flows can be termed as the intrinsic value. Show Answer

Q23) The present value is arrived by discounting the incremental cash flows at an appropriate discount rate Show Answer

Q24) The maximum price at which a business can be acquired is the economic value Show Answer

Q25) Net assets = Total Assets – Total external liabilities. Show Answer

Q26) Net assets per share = Net assets/Number of equity shares issued and outstanding. Show Answer

Q27) MVA = Net operating profit after taxes – (Total capital x WACC) Show Answer

Q28) If EVA is negative, it implies that the company is adding to the wealth of the shareholders. Show Answer

Q29) If the EVA is positive, it implies that the company is eroded the existing value of the shareholders. Show Answer

Q30) Net Assets value method is based on the assumption that the company is going to be liquidated Show Answer

Q31) _______ is the accounting record value of assets that is shown in the balance sheet Show Answer

Q32) _______ value is used when an investor wants 'true' or 'real' value on the basis of an analysis of fundamentals without considering the prevailing price in market. Show Answer

Q33) Among all types of values, the_______ value of a business or an assets is likely to be the to the lowest. Show Answer

Q34) Valuation of shares or enterprises becomes essential under following circumstances______ Show Answer

Q35) Using______ company can evaluate the project performance and decide whether to execute the project or not to execute. Show Answer

Q36) Higher EVA implies _______ bonuses to employees. Show Answer

Q37) Declining positive EVA indicates that financial performance is______ over time. Show Answer

Q38) _______ = Market capitalization - invested equity capital. Show Answer

Q39) The_____ is the excess of the purchase consideration (the money paid to purchase the asset or business) over the total value of the assets, net of liabilities. Show Answer

Q40) Excess of future maintainable profit over normal expected profit is called ______ Show Answer

Q41) _____ Maximization is more important as compared to profit maximization. Show Answer

Q42) Book value valuation is based on the going concern principle of accounting. Show Answer

Q43) Market value refers to the price at which an asset can be traded in the market. Show Answer

Q44) Market value can be ascertained for unlisted company only. Show Answer

Q45) Market Value can be applied to tangible assets only because intangible assets cannot be sold generally Show Answer

Q46) Salvage value is also called as the scrap or residual value. Show Answer

Q47) There is a method of valuation which is absolutely correct. Show Answer

Q48) Merger and amalgamation deals can take a number of month to complete during which time valuation can fluctuate substantially. Show Answer

Q49) Market Value added is identical with the market-to-book ration Show Answer

Q50) Higher asset turnover ratio would indicate generation of more revenue by using addition capital. Show Answer

Q51) It is difficult to compute EVA. Show Answer

Q52) Comparative analysis is difficult with EVA on account of the underlying assumptions of WACC. Show Answer

Q53) EVA focuses on cash flows more than profits. Show Answer

Q54) The trend of EVA is less valuable then absolute value of EVA. Show Answer

Q55) EVA helps the company in monitoring the problems areas and thereby helps in taking corrective action to resolve these problems. Show Answer

Q56) A negative EVA means company is generating value from the funds invested in it. Show Answer

Q57) Companies that have rate of return smaller than their cost of capital sell with premium compared to the original capital invested in company. Show Answer

Q58) Market value added is not identical with the market-to-book ratio. Show Answer

Q59) Value is determined at a specific point in time and hence it is time specific and not general. Show Answer

Q60) Goodwill is Show Answer

Q61) Goodwill is to be valued when Show Answer

Q62) Goodwill is paid for obtaining Show Answer

Q63) Super profit is Show Answer

Q64) Normal profit is Show Answer

Q65) Normal profit depends on Show Answer

Q66) Goodwill as per purchase of average profit method Show Answer

Q67) Goodwill as per purchase of super profit method is equal to Show Answer

Q68) Normal rate of return depends on Show Answer

Q69) While calculating capital employed Show Answer

Q70) Any non -trading income included in the profit should be Show Answer

Q71) Under capitalization of super profit method, goodwill is equal to Show Answer

Q72) Capital employed at the end year is Rs.4,20,000. Profit earned Rs.40,000. Average capital employed is Show Answer

Q73) Rate of interest is 11% and the rate of risk is 9%. The normal rate of return is Show Answer

Q74) Capital employed at the beginning of the year is Rs.5,20,000 and the profit earned during the year Rs.60,000. Average capital employed during the year is Show Answer

Q75) Average profit is Rs.19167 and amount profit is rs.10,000. The Super Profit is Show Answer

Q76) Super Profit is Rs.9167 and the normal rate of return is 10% Goodwill as per capitalization of Super Profit method is equal to Show Answer

Q77) Capital employed is Rs.50,000 Trading Profit amounted Rs.12,200, Rs.15,000 and Rs.2000 loss for 2016, 2017 and 2018 respectively. Rate of interest is 8% and the rate of risk is 2% Remuneration from alternative employment of the proprietor is Rs.3600 p.a. Amount of Goodwill at 3 years. Purchase of Super Profit Show Answer

Q78) Shares are to be valued on Show Answer

Q79) Quoted shares are those shares which are Show Answer

Q80) Under net assets method value of a share depends on Show Answer

Q81) Net assets value is also called as Show Answer

Q82) While deciding net assets value fictitious assets Show Answer

Q83) Net assets value method is based on the assumption that the company is Show Answer

Q84) Yield value depends on Show Answer

Q85) F.M.P for yield valuation is Show Answer

Q86) Yield value is based on the assumption that Show Answer

Q87) Fair value of a share is equal to Show Answer

Q88) Value of a Partly Paid Equity Share is equal to Show Answer

Q89) Following details are extracted from the records of a company:
Rs.
2000 9% Pref. Shares of Rs.100 each 2,00,000

50,000 equity shares of Rs.10 each Rs.8 per share paid up 4,00,000
Expected profit 2,18,000
Tax Rate 40%
Transfer to general reserve 20%
Normal rate of earning 15%
Yield value per share is
Show Answer

Q90) Gross assets are Rs.1,01,000, fictitious assets Rs.350 are included in the gross assets. External liabilities are Rs.7500. 6% prefer share capital is Rs.45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs.8,500. Transfer to reserve is 10%. Pref. dividend is payable. NRR is 9%. The Net Assets Value Per Share is Show Answer

Q91) Gross assets are Rs.1,01,000, fictitious assets Rs.350 are included in the gross assets. External liabilities are Rs.7500. 6% prefer share capital is Rs.45,000. Equity capital is 4,500 equity shares of Rs.10 each fully paid. Average expected profit is Rs.8,500. Transfer to reserve is 10%. Pref. dividend is payable. NRR is 9%. The yield value is Show Answer

Q92) The company earns a net profit of Rs.24,000 with a capital of Rs.1,20,000. The NRR is 10%. Under capitalization of super profit, goodwill will be Show Answer

Q93) Average capital employed Rs.14,00,000
Net profit
2016 2,50,000
2017 1,00,000 loss
2018 4,50,000
NRR 10%
Goodwill at 3 years purchase of super profit will be : Show Answer

Q94) Average capital employed Rs.14,00,000
Net profit
2016 2,50,000
2017 1,00,000 loss
2018 4,50,000
NRR 10%
Goodwill by capitalization of Super profit will be: Show Answer

Q95) Equity shares of Rs.10 each 22,00,000
15% Pref. Shares of Rs.100 each 18,00,000
40,00,000
Average Net Profit 10,50,000
NRR 20%
Net Tangible assets are revalued by Rs.2,00,000 more than the amounts at which they are stated in the books Super profit of the company will be Show Answer

Q96) Equity shares of Rs.10 each 22,00,000
15% Pref. Shares of Rs.100 each 18,00,000
40,00,000
Average Net Profit 10,50,000
NRR 20%
Net Tangible assets are revalued by Rs.2,00,000 more than the amounts at which they are stated in the books Goodwill at 3 years purchase of super profit will be Show Answer

Q97) Equity shares of Rs.10 each 22,00,000
15% Pref. Shares of Rs.100 each 18,00,000
40,00,000
Average Net Profit 10,50,000
NRR 20%
Net Tangible assets are revalued by Rs.2,00,000 more than the amounts at which they are stated in the books. Intrinsic value per share will be Show Answer

Q98) Equity shares of Rs.10 each 22,00,000
15% Pref. Shares of Rs.100 each 18,00,000
40,00,000
Average Net Profit 10,50,000
NRR 20%
Net Tangible assets are revalued by Rs.2,00,000 more than the amounts at which they are stated in the books. Yield value per share will be Show Answer

Q99) Equity shares of Rs.10 each 22,00,000
15% Pref. Shares of Rs.100 each 18,00,000
40,00,000
Average Net Profit 10,50,000
NRR 20%
Net Tangible assets are revalued by Rs.2,00,000 more than the amounts at which they are stated in the books. Fair value per share will be Show Answer

Q100) DCF method considers Show Answer

Q101) Future cash Flow is discounted at Show Answer

Q102) Increase in working capital is Show Answer

Q103) In relative valuation multiplies may be Show Answer

Q104) In relative valuation multiplies may be computed on the basis of Show Answer

Q105) P/E ratio is calculated on the basis of Show Answer

Q106) EPS is calculated on the basis of Show Answer

Q107) Free cash flow to equity shareholders is what remains Show Answer

Q108) EVA is calculated to find out contribution of the organization to Show Answer

Q109) EVA is calculated on the basis of Show Answer

Q110) Goodwill is an intangible fixed asset which has a realizable value Show Answer

Q111) Goodwill can be realized at any time. Show Answer

Q112) Goodwill is fictitious asset. Show Answer

Q113) Goodwill depends on personal reputation of the enterprise. Show Answer

Q114) Goodwill consists of the super earning power. Show Answer

Q115) Goodwill may be purchased or non-purchased Show Answer

Q116) Accounting system recognizes only purchase goodwill Show Answer

Q117) Non-purchased goodwill is recognized in financial statements. Show Answer

Q118) FMP is considered in valuation of goodwill. Show Answer

Q119) FMP is calculated on the basis of adjusted average profit. Show Answer

Q120) Super profit is the profit which is more than the normal profit earned by similar organizations in the industry. Show Answer

Q121) NRR is calculated on the basis of Rate of interest only. Show Answer

Q122) Investments are non-trading assets. Show Answer

Q123) Fictitious assets should be included in average capital employed. Show Answer

Q124) Valuation of shares has to be done when they are to be bought and sold. Show Answer

Q125) Intrinsic value is also known as Net Asset Value. Show Answer

Q126) Yield value depends on Net Assets. Show Answer

Q127) Fair value is the average of intrinsic value and yield value. Show Answer

Q128) Valuation of shares from the point of view of majority shareholders is based on divided. Show Answer

Q129) Valuation of shares from the point of view of minority shareholders is based on FMP. Show Answer

Q130) EPS depends on net profit available to equity shareholders. Show Answer

Q131) P/E ratio is a relationship between M.P and EPS. Show Answer

Q132) EVA is calculated to show profitability of the enterprise. Show Answer

Q133) EVA shows contribution to wealth of the shareholders. Show Answer

Q134) EVA is decided on the basis of NOPAT. Show Answer