TRUE OR FALSE

1. Asset has been defined by the industry as transactions that would yield future economic
benefits as a result of past transactions.
2. Brown field investment is the term used to describe businesses that are starting from
scratch.
3. Enterprise-wide Risk Management allows the company to increase performance variability.
4. Risk identification is important to allow investors to assess impact of the risk to their
investment.
5. Brown field investments are easier to evaluate as information is already available from prior
years.
6. Book value is the term used to describe the value derived from the amounts reflected in the
financial statements.
7. Borrowing that are contracted to be paid after 24 months reflected in the financial
statements.
8. Equipment is classified as non-current assets.
9. To get book value per share, total liabilities is deducted from total assets and the resulting
figure is divided by total authorized shares.
10. Book value method is transparent approach since value can be easily verified by looking at
the financial statements.
11. Replacement cost is the cost of similar assets that have the nearest equivalent value as of
the valuation date.
12. Replacement value is affected by asset age, size and its competitive advantage.
13. Insurance companies use replacement value as basis to determine the appropriate
insurance premium to be charged to their clients.
14. For real properties, it is more important to look at the age of the asset than its size.
15. Replacement value method is superior to book value as it gives an indication of true value of
the firm as of the valuation date.
16. Replacement value is an estimate of cost of reproducing, creating, developing or
manufacturing a similar asset.
17. If there is no comparable asses found in the market, it is more appropriate to use
reproduction value method.
18. Reproduction value is used for business ventures that are using highly specialized
equipment in their operations.
19. Reproduction value is easy to validate despite not having comparable assets in the industry.
20. Among the approaches, the book value method gives the most recent approximate of the
company value.
MULIPLE CHOICE

1. This has been defined by the industry as transactions that would yield future economic
benefits as a result of past transactions.
a. Asset
b. Equity
c. Net Assets
d. Shares of Stocks
2. These are the investments which are already in the going concern state, as the most
business are in the optimistic perspective that they will grow in the future because of
historical proof.
a. Green Field Investments
b. Brown Field Investments
c. Blue Field Investments
d. Black Field Investments
3. The following describes the benefits having a sound Enterprise-wide Risk Management
system expect.
a. Facilities elimination of all business risks
b. Manage performance variability
c. Enhance business resilience against changes
d. Improve distribution of resource across the firm
4. One of the advantages of using asset-based methods in valuation is
a. Relies on the ability of the firm to generate revenues in the coming years
b. Considers future cash flows that can be derived from the use of assets
c. Incorporates how the market perceives the value of the company
d. Enables stakeholders to validate firm value based on the value of assets it currently
own
5. This refers to the value recorded in the accounting books of a firm as reflected in the
audited financial statements.
a. Exit value
b. Book value
c. Earnings per share
d. Fair market value
6. Receivables that are collectible after 60 days are classified as
a. Current Liabilities
b. Non-current Liabilities
c. Current Assets
d. Non-current Assets
7. The net book value of assets may also represents
a. Total shareholder’s equity
b. Total Assets
c. Total Liabilities
d. Total long-term debt
8. Book value also reflects the company’s
a. Historical value
b. Liquidation value
c. Intrinsic value
d. Fair market value
9. Using the book value has its advantages, the following statements provide them except
a. Information necessary for computation can be quickly gathered
b. Validated by a third-party expert with knowledge on how much assets are sold in
the open market
c. Shows a transparent view on firm value
d. Can easily be validated by reviewing the company’s audited financial statements
10. Cost of similar assets that have the nearest equivalent value as of the valuation date.
a. Book value
b. Replacement cost
c. Fair market value
d. Reproduction value
11. The factor that affects the replacement value of an asset are the following except
a. Competitive advantage of the asset
b. Size of the asset
c. Original acquisition cost of the asset
d. Asset age
12. The main basis to determine the value of the insurance premium to be paid to cover the risk
for an asset is
a. Original acquisition cost
b. Replacement cost
c. Book value as of premium payment date
d. Acquisition cost less accumulated depreciation and impairment losses
13. When determining replacement costs of assets, valuators tend to consult with _________
a. Actuaries
b. Board of Directors
c. Appraisers
d. Equity Analyst
14. Book value and replacement values of an asset are theoretically different. The difference of
these two is
a. Book value is based on the historical acquisition costs while replacement value is
based on the net asset value as of balance sheet date.
b. Book value can be computed from the financial statements while replacement value
is gathered by employing services of an appraiser.
c. Book value is computed on a per share basis, but replacement cost is shown as
absolute values.
d. book value includes cost allowances for gaps against market prices while
replacement cost does not.
15. What method is appropriate in valuing assets which do not have available external
information even after consulting with appraisers?
a. Book value method
b. Replacement value method
c. Reproduction value method
d. Liquidation value method
16. The use of reproduction value method is appropriate for the following except
a. When calculating value of new technology or start-up businesses
b. Ventures with highly specialized equipment
c. Companies that are highly reliant with intangibles assets
d. Businesses that use equipment supplied by the third-party manufacturer
17. Reproduction value is the
a. Estimate of cost of reproducing, creating, developing or manufacturing a similar
asset internally
b. Salvage value of the asset
c. Net value reflected in the company’s financial statements
d. Cost of similar assets that have the nearest equivalent value as of the valuation date
18. What is the limitation imposed by the use of reproduction value method?
a. It considers only the original cost of assets at the time they are acquired
b. High professional fees of appraisers
c. Difficulty in validating reasonableness of calculated value because of limited
comparators
d. Inability to forecast future cash flows accurately because of uncertainties in the
market
19. The following methods shows the most recent value of the firm assets in the market as of
the valuation date, except
a. Replacement value method
b. Liquidation value method
c. Reproduction value method
d. Book value method
20. When computing for book value, which of the following items should be deducted the asset
value?
a. Total liabilities
b. Total shareholders equity
c. Long-term debt only
d. Ordinary share capital