Question 1

What is the purpose of the Statement on Standards for Valuation Services (SSVS) No. 1 introduced by the AICPA?

Accepted Answer

In June 2007, the AICPA introduced SSVS

Question 2

Egan, a forensic accountant, was appointed for a business valuation engagement by the management of Dreamsong, Inc. He qualified the purpose of the valuation, type of engagement, and the ownership interest to be considered. What should be Egan's next step?

Accepted Answer

A)  Issue the valuation report. 
B)  Estimate the value of the business. 
C)  Gather the necessary information. 
D)  Analyze the information gathered. 
A)  Issue the valuation report. 
B)  Estimate the value of the business. 
C)  Gather the necessary information. 
D)  Analyze the information gathered.

Question 3

Which of the following is true of a summary report?

Accepted Answer

A)  It is a structured and comprehensive submission. 
B)  It includes certain minimum elements already included in the detailed report. 
C)  It identifies the procedures and scope of work performed. 
D)  It is a limited scope report and should be explicitly titled as a "summary report." 
A)  It is a structured and comprehensive submission. 
B)  It includes certain minimum elements already included in the detailed report. 
C)  It identifies the procedures and scope of work performed. 
D)  It is a limited scope report and should be explicitly titled as a "summary report."

Question 4

Which of the following is a premise of value that is applied to business valuations?

Accepted Answer

A)  going concern 
B)  materiality 
C)  substance over form 
D)  neutrality 
A)  going concern 
B)  materiality 
C)  substance over form 
D)  neutrality

Question 5

The AICPA has more active credential holders (Certified Valuation Analysts) than all other valuation credentials combined.

Accepted Answer

A) True 
 B)False

Question 6

A detailed report is a structured and comprehensive submission designed to provide the reader with a sufficient understanding of the data, reasoning, and analysis underlying the conclusion of value.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following methods involves the development of a proxy benefit?

Accepted Answer

A)  net asset value method 
B)  guideline transaction method 
C)  capitalization of earnings method 
D)  dividend payout method 
A)  net asset value method 
B)  guideline transaction method 
C)  capitalization of earnings method 
D)  dividend payout method

Question 8

The NAV method determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is situation commonly drives a business valuation engagement?

Accepted Answer

A)  hypothecation of assets 
B)  shareholder dispute 
C)  hedging a company's derivatives 
D)  determination of dividend payout 
A)  hypothecation of assets 
B)  shareholder dispute 
C)  hedging a company's derivatives 
D)  determination of dividend payout

Question 10

Which of the following standards of value is also known as strategic value?

Accepted Answer

A)  investment value 
B)  book value 
C)  fair value 
D)  fair market value 
A)  investment value 
B)  book value 
C)  fair value 
D)  fair market value

Question 11

Which of the following situations will result in the investment value of a business approximating to the fair market value of the business?

Accepted Answer

A)  when an investor's requirements and expectations are different than the fair value of the business 
B)  when an investor's requirements and expectations are representative of the book value of the business 
C)  when an investor's requirements and expectations are different than the market 
D)  when an investor's requirements and expectations are representative of the market 
A)  when an investor's requirements and expectations are different than the fair value of the business 
B)  when an investor's requirements and expectations are representative of the book value of the business 
C)  when an investor's requirements and expectations are different than the market 
D)  when an investor's requirements and expectations are representative of the market

Question 12

The management of Quills and Ink want to calculate the required rate of return (ROR) of the company. The following information is available: Risk free rate 5.30%
Equity risk premium 4.24%
Firm size premium 2.16%
Industry risk premium 6.50%
Specific company risk premium 3.00%
Calculate the ROR of Quills and Ink.

Accepted Answer

A)  16.96% 
B)  21.20% 
C)  18.20% 
D)  19.40% 
A)  16.96% 
B)  21.20% 
C)  18.20% 
D)  19.40%

Question 13

Which of the following is a reason why purpose of business valuation is important?

Accepted Answer

A)  It helps develop a suitable capitalization rate. 
B)  It can assist in representing the expected future benefits. 
C)  It determines the premise of value. 
D)  It identifies assumptions and limiting conditions. 
A)  It helps develop a suitable capitalization rate. 
B)  It can assist in representing the expected future benefits. 
C)  It determines the premise of value. 
D)  It identifies assumptions and limiting conditions.

Question 14

Which of the following methods is a logical selection when engaged to value a nonoperating company or a company pending liquidation?

Accepted Answer

A)  net asset value method 
B)  dividend payout method 
C)  capitalization of earnings method 
D)  guideline transaction method 
A)  net asset value method 
B)  dividend payout method 
C)  capitalization of earnings method 
D)  guideline transaction method

Question 15

Which of the following is included in the first step of the valuation process?

Accepted Answer

A)  issuing the valuation report 
B)  analyzing the company's financial statements 
C)  selecting and applying a valuation approach 
D)  qualifying the ownership interest to be considered 
A)  issuing the valuation report 
B)  analyzing the company's financial statements 
C)  selecting and applying a valuation approach 
D)  qualifying the ownership interest to be considered

Question 16

Which of the following methods is used in combination with net asset value method in the absence of valid market comps?

Accepted Answer

A)  capitalization of earnings method 
B)  guideline transaction method 
C)  dividend payout method 
D)  earnings payout method 
A)  capitalization of earnings method 
B)  guideline transaction method 
C)  dividend payout method 
D)  earnings payout method

Question 17

The discount and capitalization rates are equal when the growth rate is positive.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following premiums is generally calculated as the excess of stock market returns over government bond returns?

Accepted Answer

A)  equity risk premium 
B)  specific company risk premium 
C)  industry risk premium 
D)  firm size premium 
A)  equity risk premium 
B)  specific company risk premium 
C)  industry risk premium 
D)  firm size premium

Question 19

Why it is important to distinguish between enterprise goodwill and personal goodwill in divorce valuations?

Accepted Answer

A)  In many states, enterprise goodwill is not considered a marital asset while personal goodwill is. 
B)  In many states, enterprise goodwill is considered a marital asset while personal goodwill is not. 
C)  Enterprise goodwill can be valued reasonably, while it is not possible to value personal goodwill. 
D)  Enterprise goodwill cannot be separately identified, while personal goodwill can be identified. 
A)  In many states, enterprise goodwill is not considered a marital asset while personal goodwill is. 
B)  In many states, enterprise goodwill is considered a marital asset while personal goodwill is not. 
C)  Enterprise goodwill can be valued reasonably, while it is not possible to value personal goodwill. 
D)  Enterprise goodwill cannot be separately identified, while personal goodwill can be identified.

Question 20

Which of the following is true of capitalization?

Accepted Answer

A)  It is the same as discounting. 
B)  It is more commonly used with prospective data. 
C)  It is applied to a single benefit stream. 
D)  It converts present values to future benefits. 
A)  It is the same as discounting. 
B)  It is more commonly used with prospective data. 
C)  It is applied to a single benefit stream. 
D)  It converts present values to future benefits.

What is the purpose of the Statement on Standards for Valuation Services (SSVS) No. 1 introduced by the AICPA?

Egan, a forensic accountant, was appointed for a business valuation engagement by the management of Dreamsong, Inc. He qualified the purpose of the valuation, type of engagement, and the ownership interest to be considered. What should be Egan's next step?

Which of the following is true of a summary report?

Which of the following is a premise of value that is applied to business valuations?

The AICPA has more active credential holders (Certified Valuation Analysts) than all other valuation credentials combined.

A detailed report is a structured and comprehensive submission designed to provide the reader with a sufficient understanding of the data, reasoning, and analysis underlying the conclusion of value.

Which of the following methods involves the development of a proxy benefit?

The NAV method determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities.

Which of the following is situation commonly drives a business valuation engagement?

Which of the following standards of value is also known as strategic value?

Which of the following situations will result in the investment value of a business approximating to the fair market value of the business?

Which of the following is a reason why purpose of business valuation is important?

Which of the following methods is a logical selection when engaged to value a nonoperating company or a company pending liquidation?

Which of the following is included in the first step of the valuation process?

Which of the following methods is used in combination with net asset value method in the absence of valid market comps?

The discount and capitalization rates are equal when the growth rate is positive.

Which of the following premiums is generally calculated as the excess of stock market returns over government bond returns?

Why it is important to distinguish between enterprise goodwill and personal goodwill in divorce valuations?

Which of the following is true of capitalization?

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Financial Statements Analysis Reading Between the Lines

Fraud and White-Collar Crime

Conducting a Fraud Investigation

Transforming Data Into Evidence Part 1

Transforming Data Into Evidence Part 2

Professional Responsibilities

Special Topics

Filters

Exam 11: Fundamentals of Business Valuation

What is the purpose of the Statement on Standards for Valuation Services (SSVS) No. 1 introduced by the AICPA?

Egan, a forensic accountant, was appointed for a business valuation engagement by the management of Dreamsong, Inc. He qualified the purpose of the valuation, type of engagement, and the ownership interest to be considered. What should be Egan's next step?

Which of the following is true of a summary report?

Which of the following is a premise of value that is applied to business valuations?

The AICPA has more active credential holders (Certified Valuation Analysts) than all other valuation credentials combined.

A detailed report is a structured and comprehensive submission designed to provide the reader with a sufficient understanding of the data, reasoning, and analysis underlying the conclusion of value.

Which of the following methods involves the development of a proxy benefit?

The NAV method determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities.

Which of the following is situation commonly drives a business valuation engagement?

Which of the following standards of value is also known as strategic value?

Which of the following situations will result in the investment value of a business approximating to the fair market value of the business?

Which of the following is a reason why purpose of business valuation is important?

Which of the following methods is a logical selection when engaged to value a nonoperating company or a company pending liquidation?

Which of the following is included in the first step of the valuation process?

Which of the following methods is used in combination with net asset value method in the absence of valid market comps?

The discount and capitalization rates are equal when the growth rate is positive.

Which of the following premiums is generally calculated as the excess of stock market returns over government bond returns?

Why it is important to distinguish between enterprise goodwill and personal goodwill in divorce valuations?

Which of the following is true of capitalization?

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Financial Statements Analysis Reading Between the Lines

Fraud and White-Collar Crime

Conducting a Fraud Investigation

Transforming Data Into Evidence Part 1

Transforming Data Into Evidence Part 2

Professional Responsibilities

Special Topics

Filters