ACC 150: Valuation Concepts and Methods

Student Activity Sheet #12

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

Quiz Materials:
Pen and non-scientific calculator

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is a 3 paged test and is composed of 2 sections and has a total score of 30 points. You have
sixty (60) Minutes to finish this examination. The breakdown of the exam is as follows:

(1) True or False questions - The questions in this section LEARNING OBJECTIVE:
is with four answer choices. The test is composed of 20
questions and is rated as 1 point each This assessment measures the
(2) Essay questions - The questions in this section is with competence of the student in terms of
four answer choices. The test is composed of 2 his/her application of knowledge and skills
in the following topic:
questions and is rated as 5 points each
1. Risk in Business Valuation
2. Related Concepts in Business
All things unnecessary for the test must be put in front of the
Valuation
testing area. Use BLACK or BLUE ink ballpen only. Write all your
answers on the designated answer sheet. Further, erasures are
strictly NOT allowed and will invalidate your answers.

You may NOT use smart phones or reference materials during the testing session. Only the allowed
calculators should be used.

Try to answer all questions. In general, if you have some knowledge about a question, it is better to try
to answer it. You will not be penalized for guessing.

Be sure to allocate your time carefully so you can complete the entire test within the exam session. You
may go back and review your answers at any time during the exam session.

Those who are caught cheating or doing acts not allowed during the exam shall be instructed to
surrender their test papers and shall leave the testing room immediately. Subsequently, their papers
shall be rated as ZERO.

This concludes the instruction page.

You may now begin answering.

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 ACC 150: Valuation Concepts and Methods
Student Activity Sheet #12

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

I. True or False
Write TRUE if the statement is true. Otherwise, write FALSE. Use CAPITAL letters only. Erasures,
changing of final answer, and the like will be considered wrong.

1. There’s a trade-off between risk and return in business valuation. Investors

expect to receive a higher return as the company exposes them to lesser risk.

2. The factors affecting risk will vary from company to company, among
industries, and over time within the same company.

3. Strong, predictable growth prospects generally equate with lower industry risk
and higher value.

4. Large industry segments characterized by intense global price competition are

particularly safe and not risky.

5. If customers can easily switch to a substitute product, the industry’s risk is

lesser.

6. Supply chain partners with more power tend to characterize a higher industry
risk profile than those where the balance of power is in favor of the company.

7. Less is at stake when companies participate in industries that require

continual investments in technology or research and development.

8. Business risk relates to all factors that may prevent the realization of
forecasted earnings.

9. Items which impact sales, cost of sales, or administrative and operating

expenses, are a component of financial risk.

10. Liquidity risk occurs when an investor desires to liquidate an investment.

11. Strong form Efficient Market Hypothesis (EMH) suggests that all past
information is priced into securities. Fundamental analysis of securities can provide an investor with
information to produce returns above market averages in the short term, but there are no "patterns" that
exist.

12. Weak Form Efficient Market Hypothesis (EMH) says that all information, both
public and private, is priced into stocks and that no investor can gain advantage over the market as a
whole.

This document is the property of PHINMA EDUCATION 2

 ACC 150: Valuation Concepts and Methods
Student Activity Sheet #12

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

13. Semi-Strong Form EMH: Implies that neither fundamental analysis nor
technical analysis can provide an advantage for an investor and that new information is instantly priced
in to securities.

14. Potential investors will assess the liquidation value of a company before
investing because they want to know how much of their funds would be returned in the event of
bankruptcy.

15. Employees are mostly concerned with company’s payment of taxes.

16. Customers are mostly concerned with company’s financial returns.

17. Suppliers are mostly concerned with company’s revenues and safety.

18. Communities are mostly concerned with company’s economic development

because it would impact wide range of things including job creation.

19. Adequacy of working capital falls under financial risk.

20. Competition falls under business risk.

III. Essay
a. Explain efficient market hypothesis.

b. Explain how valuation affect stakeholder’s need of liquidation.

- End -

Congratulations for finishing this module! Shade the number of this module that you just have finished.

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