VALUATION METHOD

True or False

1. Valuation does not include the use of forecasts to come up with reasonable estimate of value of an entity's assets or its equity*

True

False

2. Going Concern firm value is determined under the going concern assumption. The going concern assumption believes that the entity will not continue to do its business activities into the foreseeable future,*

True

False

3. Fundamental analysts are persons who are interested in understanding and measuring the intrinsic value of a firm.*

True

False

4. Businesses treat capital as a scarce resource that they should compete to obtain and efficiently manage.*

True

False

5. Valuation techniques may differ across different assets, but all follows similar fundamental principles that drives the core of these approaches.*

True

False

6. Methods to value for real estate can may be different on how to value an entire business.*

True

False

7. As valuation mostly deals with projections about future events, analysts should hone their ability to balance and evaluate different assumptions used in each phase of the valuation exercise, assess validity of available empirical evidence and come up with rational choices that aligns with the ultimate objective of the valuation activity*

True

False

8. Value, in the point of view of corporate shareholders, relates to the difference between cash inflows generated by an investment and the cost associated with the capital invested which captures both time value of money and risk premium.*

True

False

9. In the corporate setting, the fundamental equation of value is grounded on the principle that Alfred Marshall popularized - a company creates value if and only if the return on capital invested does not exceed the cost of acquiring capital*

True

False

10. Acquisition is the general term which describes the transaction two companies

have their assets combined to form a wholly new entity.*

True

False

11. Information Traders are Traders that react based on new information about firms that are revealed to the stock market. The underlying belief is that information traders are more adept in guessing or getting new information about firms and they can make predict how the market will react based on this.*

True

False

12. Value pertains to how much a particular object is worth to a particular set of eyes.*

True

False

13. According to the NCFB Institute, valuation 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*

True

False

14. Intrinsic value refers to the value of any asset based on the assumption assuming there is a hypothetically complete understanding of its investment characteristics.*

True

False

15. A merger usually has two parties: the buying firm and the selling firm. The buying firm needs to determine the fair value of the target company prior to offering a bid price.*

True

False

MCQ

1. 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

2. Which key principles in valuation refers to Market forces are constantly changing, and they normally provide guidance of what rate of return should investors expect from different investment vehicles in the market?*

a. The value of a business is defined only at a specific point in time

b. Value varies based on the ability of business to generate future cash flows

c. Firm value can be impacted by underlying net tangible assets

d. Market dictates the appropriate rate of return for investors

3. ________ tend to look for companies with good growth prospects that have poor management*

a. Fundamental Analysts

b. Activist Investors

c. Chartists

d. Information Traders

4.Which key principles in evaluation refers to Business value tend to change every day as transaction happens?*

a. The value of a business is defined only at a specific point in time

b. Value varies based on the ability of business to generate time future cash flows

c. Firm value can be impacted by underlying net tangible assets

d. Market dictates the appropriate rate of return for investors

5. ________ refer to the characteristics of an entity related to its financial strength, profitability or risk appetite.*

a. Intrinsic Value

b. Fundamentals

c. Technical Characteristics

d. Financial Value

6. Value is determined under the going concern assumption.*

a. Going concern value

b. Liquidation Value

c. Intrinsic Value

d. Fair Market Value

7. According to the CFA Institute, ________ 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. Valuation

b. Price Estimation

c. Fundamentals

d. Appraisal

8. Valuation places great emphasis on the _______ that are associated in the exercise.*

a. Professional judgment

b. Human reasoning

c. Professional Skepticism

d. Due diligence

9. One major factor linked to the value of business that reflects what is the long-term and strategic decision of the company.*

a. Current Operations

b. Future Prospects

c. Embedded Risks

d. All of the above

10. One major factor linked to the value of the business that shows how is the operating performance of the firm in the recent year.*

a. Current Operations

b. Future Prospects

c. Embedded Risks

d. All of the above

11. ________ refers to the possible range of values where the real firm value lies.*

a. risk of the unknown

b. volatility

c. uncertainty

d. None of the above

12. 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

13. The relevance of valuation in ____________ largely depends on the investment objectives of the investors or financial managers managing the investment portfolio*

a. Portfolio Management

b. Fundamental Management

c. Financial Management

d. Investment Management

14. Generally, the valuation process considers these steps, except ____________.*

a. Understanding the Business

b. Forecasting Financial Performance

c. Preparing Valuation model based on forecasts

d. All of the above

15. One major factor linked to the value of business that shows what are the business risks involved in running the business.*

Current Operations

Future Prospects

Embedded Risks

All of the above

16. They believe that these metrics imply investor psychology and will predict future movements in stock prices.*

a. Fundamental Analysts

b. Activist Investors

c. Chartists

d. Information Traders

17. The key principles in valuation refers to general concepts for most valuation techniques put emphasis on future cash flows except for some circumstances where value can be better derived from asset liquidation is*

a. The value of a business is defined only at a specific point in time

b. Value varies based on the ability of business to generate tangible future cash flows

c. Firm value can be impacted assets

d. Market dictates the appropriate rate of return for investors

18. _________ refers to the value of any asset based on the assumption assuming there is a hypothetically complete understanding of its investment characteristics.*

a. Going concern value

b. Liquidation Value

c. Intrinsic Value

d. Fair Market Value

19. ____________ pertains to how much a particular object is worth to a particular set of eyes.*

a. Price

b. Value

c. Cost

d. Fundamentals

20. The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.*

a. Going concern value

b. Liquidation Value

c. Intrinsic Value

d. Fair Market Value