Valuation Concept and Methodologies
Instructor: John Bo S. Cayetano
1. ___________ pertains to how much a particular object is worth to a particular price
a. Price
b. Value
c. Cost
d. Fundamentals
2. 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
3. Valuation places great emphasis on the ____________ that are associated in the exercise .
a. Professional judgement
b. Human reasoning
c. Professional Skepticism
d. Due diligence
4. The value of a businesses can be basically linked to three major factors, except
a. Current operations
b. Future Prospects
c. Embedded Risks
d. All of the above
5. One major factor linked to the value of 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
6. One major factor linked to the value of business that reflects what is long-term and strategic
decision of the company.
a. Current operations
b. Future Prospects
c. Embedded Risks
d. All of the above
7. One major factor linked to the value of business that shows what are the business risk involved in
running the business.
a. Current operations
b. Future Prospects
c. Embedded Risks
d. All of the above
8. ________ refers to the value if any asset based on the assumption assuming there is hypothetically
complete understanding of it’s investment characteristics.
a. Going concern value
b. Liquidation Value
Page 1 of 5
c.
d.
Intrinsic Value
Fair market value
9. ________ paticularly relevant for companies who are experiencing severe financial distress.
a. Going concern value
b. Liquidation Value
c. Intrinsic Value
d. Fair market value
10. Value is determined under the going concern assumption.
a. Going concern value
b. Liquidation Value
c. Intrinsic Value
d. Fair market value
11. The price , expressed in terms of cash equivalents , at which properly 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
12. 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
13. These are persons who are interested in understanding and measuring the intrinsic value of a firm.
a. Fundamental analysis
b. Activist investors
c. Chartists
d. Information teacher
14. ________ 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
15. ________ tend to look for companies with good growth prospects that have poor management.
a. Fundamental Analysts
b. Activist Investors
c. Chartists
d. Information Traders
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
Page 2 of 5
17. The underlying belief is that __________ are more adopt in guessing or getting new information
about firms and they can make predict how the market will react based on this. Hence, _______
correlate value and how information will affect this value.
a. Fundamental Analysts
b. Activist Investors
c. Chartists
d. Information Traders
18. Under portfolio management , the following activities can be performed through the use of
valuation techniques, except _________.
a. Stock selection
b. Deducting Market expectation
c. Both can be performed
d. None of the above
19. Separating a segment or component business and transforming this into a separate legal entity
whose ownership will be transferred to shareholders.
a. Mergers
b. Acquisitions
c. Divestiture
d. Spin-off
20. Sale of a major component or segment of a business (e.g brand or product line ) to another
company.
a. Mergers
b. Acquisitions
c. Divestiture
d. Spin-off
21. General term which describes the transaction two companies combined to form a wholly new
entity.
a. Mergers
b. Acquisitions
c. Divestiture
d. Spin-off
22. _________ 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. On the other hand , the
selling firm (or sometimes , the target company ) should have a sense of it’s firm value as well to gauge
reasonableness of bid offers.
a.
b.
c.
d.
Mergers
Acquisitions
Divestiture
Spin-off
23. Acquisition of another business by using significant debt which uses the acquired business as a
collateral.
a.
b.
c.
d.
Mergers
Acquisitions
Divestiture
Leverage buy-out
Page 3 of 5
24. ____________ assumes that the combined value of two firms will be greater than the sum of
separate firms , __________ can be attributable to more efficient operations, cost reductions ,
increased revenues , combined products / markets ir cross-disciplinary talents of the combined
organization.
a. Synergy
b. Control
c. Synergy and control
d. None of the above
25. ___________ deals with prioritizing and distributing financial resources to activities that increase
firm value. The ultimate goal is to maximize the firm value by appropriate planning and
implementation of resources , while balancing profitability and risk appetite.
a. Financial Management
b. Corporate Finance
c. Risk Management
d. Portfolio Management
26. 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
27. Which key principles in valuation refers to Business value tend to change everyday as transactions
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 future cash flows
c. Firm value can be impacted by underlying net tangible assets
d. Market dictates the appropriate rate of return for investor
28. ____________ 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
29. Which key principles in valuation refers to Market forces are constantly changing , and they
normally provide guidance of what of rate of return should investors expect from different investment
vehicles in the market?
a. The value of a business is a 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
30. 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 future cash flows
c. Firm value can be impacted by underlying net tangible assets
d. Market dictates the appropriate rate of return for investors.
Page 4 of 5
Page 5 of 5