MCQs On VALUATION APPLICATION SITUATION SPECIFIC VALUATION part - 2

Q.1:- An entrepreneur into the hosiery business found out the reason his hosiery was not selling was due to its color. What could be the best source of this information?

• Retailer
• Government
• Supplier
• Competition

Q.2:- MSMED stands to ___________

• Mini, Small & Medium Enterprises Development
• Micro, Small & Medium Enterprises Department
• Micro, Small & Medium Enterprises Development
• Micro, Small & Medium Entrepreneurship Development

Q.3:- A business where an individual is both the owner and conductor of the business affairs is called__________________.:

• Partnership
• Corporation
• Sole Proprietorship
• None of the above

Q.4:- Cost of capital is equal to required rate of return on equity in case if investors are only:

• Debenture holders
• Bond holder
• Common stockholders
• Valuation manager

Q.5:- Which of the following is the commonly used key ratio within a particular sector in which the startup operates?

• Enterprise value/sales
• Enterprise value/EBlTDA
• None of the above
• Both (a) and (b)

Q.6:- The difference between going concern value and liquidation value at the valuation date refers to:

• Arbitrage Pricing Theory
• Absolute risk
• Asset based approach
• Adjusted Book Value Method

Q.7:- An unlisted company may issue sweat equity shares of a class of shares which has already been issued by passing a.................:

• Not mentioned
• Ordinary resolution, as prescribed by the Central Government
• Special resolution
• Ordinary resolution

Q.8:- Which of the following best represents the status of a stressed company?

• Not necessarily based on a test of erosion of net worth.
• A company heavily strapped for cash and unable to meet its debts on the due date.
• Not necessarily a Sick company within the meaning of the SICA.
• All of the above

Q.9:- What is the common method of restructuring the financially distressed business?

• Debt write-downs
• The postponement of imminent liabilities into the more distant future
• The conversion of fixed liabilities into fluid one
• All of the above

Q.10:- What can be the possible methods for ascertaining the going concern value of a distressed business?

• Comparable transaction approach
• Discounted cash flow approach
• Market comparison approach
• All of the above

Q.11:- Which of the following method is used for the valuation of start-ups which are yet to generate revenues?

• Venture capital method
• Risk factor summation method
• Score card valuation method
• All of the above.

Q.12:- Which of the following is not a valuation method for start-up companies?

• Scorecard method,
• Berks method
• Risk free factor summation method
• Venture capitalist method

Q.13:- The FMV of a company is the price at which it would change hands between a

• A willing buyer and unwilling seller
• A unwilling buyer and unwilling seller
• A willing buyer and a willing seller
• All the above

Q.14:- What happens when the government increases public spending during recessionary period?

• It has no effect on the economy.
• The increased spending worsens the recessionary situation.
• The increased spending leads to mobilization of resources in the economy and helps create demand and generate employment.
• None of the above.

Q.15:- In some countries, points of purchase displays are not allowed in retail stores. Such differences are studied by international entrepreneurs under __________ environment.

• Cultural
• Technological
• Political
• Economic

Q.16:- The idea and actions that explain how a firm will make its profits refers to...............:

• Strategy
• Mission
• Objective
• Goal

Q.17:- ________________ can be defined as psychological features that enable an individual to take action toward a desired goal?

• Attitude
• Motive
• Ego
• Trait

Q.18:- The development of a new venture based on an inventor's workoften requires .

• Heavy investment from financers
• Highly educated staff
• Expertise of an entrepreneur
• Skilled human resources

Q.19:- Entrepreneurship can best be described as:

• a process involving innovation, new products or services, and value creation
• having a strong vision
• taking a significant risk in a business context
• a process that requires setting up a business

Q.20:- MSMED stands to ...................

• Mini, Small & Medium Enterprises Development
• Micro, Small & Medium Enterprises Department
• Micro, Small & Medium Enterprises Development
• Micro, Small & Medium Entrepreneurship Development

Q.21:- Which of the following enterprises was found by Akio Morita?

• Apple
• Sony
• Samsung
• Panasonic

Q.22:- The most cited source of new business ideas is:

• a hobby.
• copying someone else.
• in-depth understanding of industry/profession.
• brainstorming

Q.23:- _________________ is one method of stimulating, and then capitalizing on, individuals in an organization who think that something can be done differently and better.

• Intrapreneurship
• Strategic Orientation
• Management
• Capitalization

Q.24:- An entrepreneur doing business within the national border is called:

• Intrapreneurship
• Domestic entrepreneurship
• Imports
• International entrepreneurship

Q.25:- Which one of the following best represents the environment of an entrepreneurial oriented organization?

• Intrapreneurial culture
• Traditional culture
• Entrepreneurial culture
• Corporate culture

Q.26:- The value of business does not depend on:

• Size of the business to be valued
• Ability of entity to earn business profit for the owner
• None of the above
• Both (a) and (b)

Q.27:- An entity obtain fund from one or more investor for the purpose of providing investment management services:

• Investment entity
• Private company
• Bank
• Financial Institution

Q.28:- Which should be most appropriate value to be considered for insurance:

• Agreed value
• Reinstatement value
• Market value
• All of the above

Q.29:- ______ is a provision under which both the insured and insurance company share the covered cost after the deductible:

• Co-insurance
• Insurance funding
• Re-insurance
• Insurance back

Q.30:- Which of the following is not considered while selecting the region?

• Proximity to the product market
• Availability of raw materials
• Law and order
• Price of land

Q.31:- Having more than 50% ownership position that provides the entrepreneur with managerial control is called ___________.

• Horizontal merger
• Diversified activity merge
• Majority interest
• Joint venture

Q.32:- Under this method it is assumed that the investor will not invest in the startup more money than it would cost to duplicate the business, which method of valuation is referred to here?

• Cost to duplicate method
• Discounted cash flow method
• Scorecard valuation method
• Valuation by stage

Q.33:- Which of the following statement is correct with respect of cost to duplicate method?

• Under this method it is assumed that the investor will not invest in the startup more money than it would cost to duplicate the business
• This method gives a conservative valuation to the startup
• Under this method the startup is valued based on the cost that it would take to duplicate the startups assets elsewhere
• All of the above

Q.34:- Which of the following method of valuation is generally used by angel investors and venture capitalists to arrive at a valuation for a startup1?

• The book value method
• Berks method
• Valuation by stage
• Venture capital method

Q.35:- Which one of the factors should be considered while assessing the location for business?

• Access from roadways to facility
• Delivery rates
• Parking
• All of the given options

Q.36:- A service enterprise is considered as small enterprise:

• Where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 1 Crore
• Where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 2 Crore
• Where the investment in equipment does not exceeds Rs. 10 lakh
• None of the above

Q.37:- The residual value of a business is:

• The expected sales value of the business, less any related costs
• The present value of cash flows after the end of the detailed forecast period
• None of the above
• Both (a) and (b)

Q.38:- Which of the following is not the characteristics of the Investment entity:

• It has more than one investment
• It has ownership interests in the form of equity or similar interests
• It has more than one investors
• None of the above

Q.39:- Which financial ratio gives an indication of an insurer's underwriting year performance?

• Profitability Ratio
• Combined Ratio
• Debts Equity Ratio
• Liquidity Risk Ratio

Q.40:- Which of the following content one of the earliest applications insurance principle?

• Charted or USA
• Charted of London
• Charted ot India
• Code of Hammurabi

Q.41:- Cyclic Industry:

• No effect on business cycle
• Sensitive to business cycle
• Unseasonal
• Effect business cycle

Q.42:- ABC Ltd. is expected to pay a dividend of Rs.1.50 in the upcoming year. Dividends are expected to grow at the rate or 8% per year. The risk free rate of return is 5% and the expected return on the market portfolio is 12%. The Stock of ABC Ltd has a beta of 0,75, Using CAPM, the return you should require on stock is................:

• 14.75%
• 21.00%
• 10.25%
• 7,25%

Q.43:- If the firm has a free cash flow equal to Rs.50 lacs and that cash flow is expected to grow at 3% forever what is the total firm value given a WACC of 9.5%?

• Rs.769 lacs
• Rs.679 lacs
• Rs.803 lacs
• Rs.715 lacs

Q.44:- When valuing equity of high-growth companies, the bulk of the value will come from the

• Fair value
• Terminal value
• Intrinsic value
• Market value

Q.45:- When two firms are combined together, the value of synergy is obtained by:

• Value of separate entity
• Value of combined entity and value of other two entities on standalone basis
• Value of combined entity
• Any of the above

Q.46:- Which is a type of preferred stock that stockholders can exchange for a predetermined number of a company's common stock?

• Participating preferred stock
• Cumulative preferred stock
• Convertible preferred stock
• Prior preferred stock

Q.47:- An analyst is valuing a firm's equity using the 'enterprise value to revenue ratio' of similar firms. Which of the following is not a factor that the analyst should use:

• Debt equity ratio
• Expected return
• EBITIJA margins
• Revenue growth

Q.48:- A firm reports EBIT of Rs.100 Lacs. The income statements shows depreciation of Rs.20 lacs. If the tax rate is 35% and total capital expenditure and increase in working capital total Rs.10 lacs, what is free cash flow to the firm?

• Rs.95 lacs
• Rs.75 lacs
• Rs.57 lacs
• Rs.65 lacs

Q.49:- Ram Ltd has an expected ROE of 25%. Its dividend growth rate will be if ………. its follows a policy of paying 30% of earnings in the firm as dividends

• 45%
• 17.5%
• 5%
• 15%

Q.50:- The change in combined ratio is most likely to indicate that the insurer has ...........................:

• Decreased no. of policies
• Improved its underwriting results
• Increased No. of policies
• Increased its premium