Practice Test

Q1) Given: The growth rate in the dividends is expected to be 8%. The Betc of the stock is 1.60 and the return on the market index is 13%. The required rate of return would be: Show Answer

Q2) Identify which of the following is not a financial liability? Show Answer

Q3) If a company has a P/E ratio of 12 and a Market to Book Value Ratio 2.10, then its Return on Equity will be Show Answer

Q4) VARTUAL LTD. acquired 1000 shares in ANKIT LTD. at a Cum-right price of Rs. 250 per share. Ankit Ltd. offered right shares of one for every two held at Rs. 125 per share. After the right issue the share price fell from Rs. 250 to Rs. 200 per share. If the rights were sold by vartual Ltd. at Rs. 70 per share, what would be the carrying cost of investment in Ankit Ltd. After the sale of rights? Show Answer

Q5) Mr. BIKRAM purchased 1000 shares in Ranjan Laboratories at Rs. 300 per share in 2005. There was Rights issue in 2008 at one share for every two held at a price of Rs. 100 per share. If Mr. Bikram subscribed to the rights, what would be carrying cost of 1500 shares. Show Answer

Q6) ANKITA LTD. has a Plant (Asset) which is carried in the Balance Sheet on 31.03.2009 at X 500 lakh. As at that date the value in use is X 400 lakh. What would be the impairment loss of the Plant, if the net selling price as on 31.03.2009 is X 300 lakh? Show Answer

Q7) The share capital of Sanjana Ltd. is Rs. 10,00,000 consisting of fully paid 10,000 shares, 15% preference shares of Rs. 100 each and 9,000 equity shares of Rs. 100 each. The after-tax profit of the company for the year 2008-09 is Rs. 1,23,000. The normal rate of return is 8%. The value of equity share of the company is Show Answer

Q8) SUHASI LTD. issued 20,000 shares of Rs. 10 each at a discount of 10%. Mr. Harish to whom 500 shares were allotted failed to pay the final call of Rs. 3 and hence, his shares were forfeited. The amount to be transferred to the credit of shares forfeiture account is Show Answer

Q9) GAYATHRI LTD. purchased 1000 shares in SAVITHA LTD. at Rs. 600 per share in 2008. There was a rights issue in 2009 at one shares for every two held at a price of Rs. 150 per share. If GAYATHRI LTD. subscribed to the rights what would be the carrying cost of 1500 shares? Show Answer

Q10) ANURAG LTD. purchased a Plant on 1.4.2008 for Rs. 10,00,000. It provides depreciation @ 20% on W.D.V. during the year ended on 31.3.2010. What would be the carrying amount of Plant on 31.3.2010, if the company provided impairment loss on Plant for Rs. 1,00,000? Show Answer

Q11) Super Profit is Rs. 9,167 and the Normal Rate of Return is 10%. Goodwill as per capitalisation of Super Profit method is equal to Show Answer

Q12) The following data is extracted from the books of HYDER LTD. as on March 31, 2010.
Paid up value of an Equity Share: Rs. 10.
Nominal value of an Equity Share: Rs. 20.
The Yield rate of return of the company: 15.75%.
If the normal rate of return is 9%, what would be value of an Equity Share of HYDER LTD. Show Answer

Q13) In case of amalgamation in the nature of purchase, Fixed Assets; Current Assets; Total Debts; Debit balance of Profit and Loss A/c and Purchase Consideration are Rs. 25,60,000; Rs. 12,50,000; Rs. 11,30,000; Rs. 2,20,000; and Rs. 24,00,000 respectively. The amount of Capital Reserve of Goodwill will be Show Answer

Q14) Chandra Ltd. acquired a machine for Rs. 65 Lakhs on 1st July, 2014. It has a life of 5 years with a salvage value of Rs. 7 Lakhs. As on 31st March, 2017, if present value of future cash flows is Rs. 28 Lakhs and net selling price is Rs. 25 Lakhs, impairment loss will be Show Answer

Q15) Roshan Ltd. agreed to absorb Richa Ltd. For this purpose Richa Ltd.'s 5000, 9% Preference shares are valued at Rs. 124.50 each and 65,000 Equity shares are valued at Rs. 32 each. If Roshan Ltd. discharged purchase consideration by issuing its Equity shares of Rs. 10 each which is having intrinsic value of Rs. 46 each. No. of Equity shares issued by Roshan Ltd. to Richa Ltd. will be Show Answer

Q16) X Ltd. holds 69% of Y Ltd., Y Ltd. holds 51 % of W Ltd., Z Ltd. holds 49% of W Ltd. As per AS 18 related parties are: Show Answer

Q17) Kovid Ltd. agreed to absorbs Shiva Ltd. Shiva Ltd. has been issued 120000 Equity Shares of Rs. 10 which having intrinsic value of Rs. 32 each. If intrinsic value of Kovid Ltd.'s equity share is Rs. 64 each, then how many equity shares should be issued by Kovid Ltd. to Shiva Ltd. to meet out the purchase consideration? Show Answer

Q18) Capital Employed is Rs. 255 Lakhs; Annual average profits are Rs. 57 Lakhs; Normal rate of return is 12%. The value of goodwill on the basis of Capitalization of super profits will be Show Answer

Q19) A firm values goodwill under 'Capitalization of Profits' method. Average profit of the firm for past 4 years has been determined at Rs. 1,00,000 (before tax). Capital employed in the business is Rs. 4,80,000 and its normal rate of return is 12%. Tax rate is 28% on average. Value of Goodwill based on capitalization of average profit will be: Show Answer

Q20) Biomed International Ltd. is developing a new production process. During the financial year ending 31st March, 2017, the total expenditure incurred was Rs. 50 lakhs. This process met the criteria for recognition as an intangible asset on 1st December, 2016. Expenditure incurred till this date was Rs. 22 lakhs. Further expenditure incurred on the process for the financial year ending 31st March, 2018 was Rs. 80 lakhs. As at 31st March, 2018, the recoverable amount of knowhow embodied in the process is estimated to be Rs. 72 lakhs. This includes estimates of future cash outflows as well as inflows. The amount of impairment loss for the year ended 31st March, 2018 is Show Answer

Q21) Goodwill is a: Show Answer

Q22) The most popular method of valuation of goodwill in case of death of a partner is Show Answer

Q23) A business is having adjusted net profits of Rs. 1,00,000 and capital employed Rs. 6,00,000. If goodwill is taken at 3 years purchase of super profits and the expected rate of return is 10% the value of goodwill win be: Show Answer

Q24) The methods of valuation of shares are: Show Answer

Q25) Intrinsic value of share can be determined by: Show Answer

Q26) In comparison to face value, the valuation of shares are usually: Show Answer

Q27) Valuation of shares is compulsory Show Answer

Q28) In view of investor, the most appropriate method of valuation of share is: Show Answer

Q29) Intrinsic value of shares is determined Show Answer

Q30) For calculating net assets the deductible liability is Show Answer

Q31) On dividend net assets by number of shares, the value of share is called: Show Answer

Q32) Goodwill is ................ Show Answer

Q33) Goodwill is to be valued when ................ . Show Answer

Q34) Goodwill is paid for obtaining ................ . Show Answer

Q35) Super profit is ................ . Show Answer

Q36) Normal profit is ................ Show Answer

Q37) Normal profit depends on ................ . Show Answer

Q38) Goodwill as per purchase of average profit method is equal to ................ Show Answer

Q39) Goodwill as per purchase or super profit method is equal to ................ Show Answer

Q40) Normal Rate of Return depends on ................ Show Answer

Q41) While calculating capital employed, ................ Show Answer

Q42) Any non-trading income included in the profit should be ................ Show Answer

Q43) Under capitalisation of super profit method, Goodwill is equal to ................ Show Answer

Q44) Rate of interest is 11% and the rate of risk is 9%. The normal rate of return is ................ Show Answer

Q45) Capital employed at the beginning of the year is Rs. 5,20,000 and the profit earned during the year is Rs. 60,000. Average capital employed during the year is ................ Show Answer

Q46) Average profit is Rs. 19,167and normal profit is Rs. 10,000. The Super Profit is ................ Show Answer

Q47) Capital employed is Rs. 50,000. Trading Profit amounted to Rs. 12,200, Rs. 15,000 and Rs. 2,000 loss for 2008, 2009 and 2010 respectively. Rate of interest is 8% and the rate of risk is 2%. Remuneration from alternative employment of the proprietor is Rs. 3,600 p.a. Amount of Goodwill at 3 years purchase of Super Profit is ................ . Show Answer

Q48) Shares are to be valued on ................ Show Answer

Q49) Quoted shares are those shares which are ................ Show Answer

Q50) Under net asset method, value of a share depends on ................ Show Answer

Q51) Net asset value is also called as ................ Show Answer

Q52) While deciding net asset value, fictitious assets Show Answer

Q53) Net asset value method is based on the assumption that the company is ................ . Show Answer

Q54) Yield value depends on ................ Show Answer

Q55) F.M.P. for yield valuation is ................ . Show Answer

Q56) Yield value is based on the assumption that ................ Show Answer

Q57) Fair value of a share is equal to ................ Show Answer

Q58) Value of a partly paid equal share is equal to ................ Show Answer

Q59) Gross assets are Rs. 1,01,000, fictitious assets Rs. 350 are included in the gross assets. External liabilities are Rs. 7,500.6% preference 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 reserves is 10% preference dividend is payable. NRR is 9%. The Net Asset Value Per share is ................ Show Answer

Q60) The company earns a net profit of Rs. 24,000 with a capital of Rs. 1,20,000. The NRR is 10%. Under capitalisation of super profit, goodwill will be Show Answer

Q61) Average capital employed Rs. 14,00,000.
Net profit 2011 - 2,50,000
2012 - 1,00,000 (loss)
2013 - 4,50,000
NRR - 10%
Goodwill at 3 year's purchase of super profit will be ................ . Show Answer

Q62) Capital employed at the end of the year is Rs. 4,20,000. Profit earned Rs. 40,000. Average capital employed is ................ Show Answer

Q63) Which of the following is not a method used for valuation of shares?
Show Answer

Q64) Which of the following method of valuation of shares is/are suitable for ascertaining the market value of shares which are quoted on a recognized stock exchange?
Show Answer

Q65) Average profit, Superprofit and Capital employed of a firm are Rs 15,60,000; Rs 4,80,000; and Rs 90,00,000 respectively. Normal rate of return is 12%. The value of goodwill on the basis of capitalization of Average Profit' and of 'Superprofit' will be:
Show Answer

Q66) As per Section 247 of the Companies Act, 2013, the Registered Valuer shall be appointed by the: Show Answer

Q67) Following information provided by B Ltd.:
Last Earning Per Share (EPS) of the company = 75 per share Company's dividend pay-out ratio = 40%
Required rate of return from equity investment = 18%
By using capitalization earning method, the value of equity will be (if dividend are expected to grow at a constant rate of 10% per annum): Show Answer

Q68) MOON Ltd. is developing a new production process. During the financial year ended 31st March, 2018, the total expenditure incurred on the process was 60 lakh. The production process met the criteria for recognition as an intangible asset on 1st December, 2017. Expenditure incurred till this date was 32 lakh. Further expenditure incurred on the process for the financial year ending 31st March, 2019 was 90 lakh. As on 31st March, 2019, the recoverable amount of know-how embodied in the process is estimated to be 82 lakh. This includes estimates of future cash outflows and inflows. The expenditure to be charged to Profit and Loss Account for the year ended 31st March, 2019 is ______ lakh. (Ignore depreciation). Show Answer

Q69) Under section 247 of The Companies Act, 2013, a Registered Valuer shall be appointed by the Company's :
Show Answer

Q70) SEBI (Share Based Employee Benefits) Regulations, 2014 apply to the:
Show Answer

Q71) P purchased business from Q on 30th June, 2019. Profit earned by Q for the preceding years ending on 31st December every year were:
2016- Rs 41,000, 2017 - Rs 40,000 and 2018 - Rs 42,000. It was ascertained that profits of 2017 included a non-recurring item of Rs 1,500 and profit of 2018 was reduced by Rs 2,000 due to an extraordinary loss on account of theft. The annual premium was Rs 200 per annum. P at the time of purchasing the business, was employed with Sufitel Associates and was getting Rs 500 p.m. He intends to replace the manager who at the present is getting Rs 350 p.m. The goodwill is calculated at 2 years purchase of the average profits. Calculate the goodwill of the business: Show Answer

Q72) Average profit of a firm is Rs 48,000. The rate of capitalisation is 12%. Assets and liabilities of the firm are Rs 4,00,000 and Rs 1,70,000 respectively. Find value of Goodwill. Show Answer

Q73) Value of share based on earning basis method is calculated as:

Show Answer

Q74) Find out the goodwill of the company from the following information:
Total Capital Employed = Rs 8,00,000 Reasonable Rate of return = 15%
Profits for the year = 1Rs 2,00,000
Use capitalization method:
Show Answer

Q75) Which of the following is not a method of business valuation?
Show Answer

Q76) Which of the following is not the method of valuation of Goodwill? Show Answer

Q77) A firm has a total capital investment of Rs 2,25,000. The firm earned net profit during the last four years Rs 35,000, Rs 40,000, Rs 60,000, Rs 50,000. The fair return on the net capital employed is 15%. The Super profit is ______ Show Answer

Q78) Which is not the approach for valuing of intangible assets? Show Answer

Q79) Average profits, Super profits and Capital employed of Z Ltd. are Rs 7,80,000; Rs 2,40,000; and Rs 45,00,000 respectively. Normal rate of return is 12%. The Value of Goodwill on the basis of Capitalization of 'Super profits' will be: Show Answer

Q80) Which of the following methods of valuation of shares is suitable for ascertaining the market value of shares which are quoted in a recognized stock exchange?
Show Answer

Q81) Identify which of the following is not a financial liability?
Show Answer

Q82) If a company has a P/E ratio of 12 and a Market to Book Value Ratio 2.10, then its Return on Equity will be
Show Answer

Q83) In comparison to face value, the valuation of shares are usually: Show Answer

Q84) Intrinsic value of shares is determined
Show Answer

Q85) Under capitalization of super profit method, Goodwill is equal to Show Answer

Q86) Net asset value is also called as Show Answer

Q87) While deciding net asset value, fictitious assets
Show Answer

Q88) Net asset value method is based on the assumption that the company is
Show Answer