Question 1

Which of the following is a primary issue of the business valuation theory?

Accepted Answer

A)  determining current benefits from the business 
B)  estimating expected future benefits 
C)  calculating historical benefits received 
D)  calculating financial ratios 
A)  determining current benefits from the business 
B)  estimating expected future benefits 
C)  calculating historical benefits received 
D)  calculating financial ratios

Question 2

The management of Quills and Ink want to calculate the required rate of return (ROR)of the company.The following information is available: $$\begin{array} { l l } 
\text { Risk free rate } & 5.30 \% \
\text { Equity risk premium } & 4.24 \% \
\text { Firm size premium } & 2.16 \% \
\text { Industry risk premium } & 6.50 \% \
\text { Specific company risk premium } & 3.00 \%
\end{array}$$ 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 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

A calculation engagement is limited in scope to specific approaches and methods determined by agreement with the client.

Accepted Answer

A) True 
 B)False

Question 6

________ proposes a "hypothetical" sale price for cash.This hypothetical sale takes place in an open and unrestricted marketplace.

Accepted Answer

A)  Book value 
B)  Present value 
C)  Historical value 
D)  Fair market value 
A)  Book value 
B)  Present value 
C)  Historical value 
D)  Fair market value

Question 7

Lilac,Inc.uses a discount rate of 17.5% its expected long-term sustainable growth rate is 1.5%.The net cash flows from operations of the company for the previous years are provided below. $$\begin{array} { | l | r | } 
\hline \text { Year } & \text { Net Cash Flow } \
\hline 2009 & \$ 190,835 \
\hline 2010 & 215,648 \
\hline 2011 & 185,96 \
\hline 2012 & 248,752 \
\hline 2013 & 221,960 \
\hline
\end{array}$$ Calculate the value of business of Lilac,Inc.

Accepted Answer

A)  $1,063,160 
B)  $1,215,040 
C)  $1,328,950 
D)  $1,090,420 
A)  $1,063,160 
B)  $1,215,040 
C)  $1,328,950 
D)  $1,090,420

Question 8

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.

Question 9

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 10

Which of the following is true of the net asset method?

Accepted Answer

A)  It requires the forensic accountant to adjust the company's balance sheet from book value to fair market value. 
B)  It determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities. 
C)  It commonly requires the forensic accountant to use his or her judgment to arrive at the fair market value assessments. 
D)  It involves the development of a proxy benefit and the capitalization of this benefit to provide an indicated business value. 
A)  It requires the forensic accountant to adjust the company's balance sheet from book value to fair market value. 
B)  It determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities. 
C)  It commonly requires the forensic accountant to use his or her judgment to arrive at the fair market value assessments. 
D)  It involves the development of a proxy benefit and the capitalization of this benefit to provide an indicated business value.

Question 11

Why is identification of the ownership interest to be valued important?

Accepted Answer

Identification of the ownership interest

Question 12

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 N

Question 13

Which of the following standards of value is mandated for all federal tax matters?

Accepted Answer

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

Question 14

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 15

Which of the following is true of the standards of value used in business valuation?

Accepted Answer

A)  The fair value proposes a hypothetical sale in an open and unrestricted market. 
B)  The investment value is often used in dissenting minority interest litigation. 
C)  The book value of a business rarely represents its fair market value. 
D)  The fair market value is usually greater than the investment value. 
A)  The fair value proposes a hypothetical sale in an open and unrestricted market. 
B)  The investment value is often used in dissenting minority interest litigation. 
C)  The book value of a business rarely represents its fair market value. 
D)  The fair market value is usually greater than the investment value.

Question 16

The book value of a business may or may not represent its fair market value.

Accepted Answer

A) True 
 B)False

Question 17

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 18

A valuation performed in litigation must conform to the reporting provisions of professional standards.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following business valuation organizations merged with the NACVA in 2012?

Accepted Answer

A)  the American Society of Certified Analysts 
B)  the Institute of Business Appraisers 
C)  the American Society of Appraisers 
D)  the Institute of Valuation Analysts 
A)  the American Society of Certified Analysts 
B)  the Institute of Business Appraisers 
C)  the American Society of Appraisers 
D)  the Institute of Valuation Analysts

Question 20

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

Which of the following is a primary issue of the business valuation theory?

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

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

A calculation engagement is limited in scope to specific approaches and methods determined by agreement with the client.

________ proposes a "hypothetical" sale price for cash.This hypothetical sale takes place in an open and unrestricted marketplace.

Which of the following is true of capitalization?

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

Which of the following is true of the net asset method?

Why is identification of the ownership interest to be valued important?

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

Which of the following standards of value is mandated for all federal tax matters?

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

Which of the following is true of the standards of value used in business valuation?

The book value of a business may or may not represent its fair market value.

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

A valuation performed in litigation must conform to the reporting provisions of professional standards.

Which of the following business valuation organizations merged with the NACVA in 2012?

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

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

Transforming Data Into Evidence

Professional Responsibilities

Special Topics

Filters

Exam 11: Fundamentals of Business Valuation

Which of the following is a primary issue of the business valuation theory?

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

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

A calculation engagement is limited in scope to specific approaches and methods determined by agreement with the client.

________ proposes a "hypothetical" sale price for cash.This hypothetical sale takes place in an open and unrestricted marketplace.

Which of the following is true of capitalization?

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

Which of the following is true of the net asset method?

Why is identification of the ownership interest to be valued important?

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

Which of the following standards of value is mandated for all federal tax matters?

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

Which of the following is true of the standards of value used in business valuation?

The book value of a business may or may not represent its fair market value.

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

A valuation performed in litigation must conform to the reporting provisions of professional standards.

Which of the following business valuation organizations merged with the NACVA in 2012?

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

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

Transforming Data Into Evidence

Professional Responsibilities

Special Topics

Filters