VALUATION, CONCEPTS, AND 7.

Valuation is also important to business

because of what?
METHODOLOGIES a. Portfolio Management
b. Analysis of Business Transactions
QUIZ 1 – BFAC01 c. Corporate Finance
d. Legal and Tax Purposes
1. This refers to the relationship between
interrelated products and services in the 8. It also enables communication about
industry. significant corporate matters between
a. New Entrants
management, shareholders, consultants,
b. Industry Rivalry
and investment analysis.
c. Buyer Power a. Intrinsic Value
d. Substitutes and Complements b. Liquidation Value
c. Valuation Methodology
2. This refers to how suppliers can negotiate
d. Going Concern Value
better terms in their favor.
a. Buyer Power 9. It is the ultimate goal of corporate finance.
b. New Entrants a. To unbalance the profitability and risk
c. Supplier Power appetite
d. Industry Rivalry b. To increase the firm value
c. To increase risk appetite
3. This refers to the barriers to entry to industry
d. To decrease the firm value
by new market players.
a. New Entrants 10. This value says that transferability of future
b. Substitutes and Complements cash flows also important especially to
c. Industry Rivalry potential acquirers.
d. Buyer Power a. Value is influenced by transferability
of future cash flows.
4. This refers to inherent technical and b. Value varies based on the ability of
economic characteristics of an industry and
the business to generate future cash
the trends that may affect this structure. flows.
a. Assess Industry Structure c. The value of a business is defined
b. Competitive Position only at a specific point in time.
c. Understanding the Business Model d. Market dictates the appropriate rate
d. Review Historical Company
for investors.
Performance
11. It is the value of any asset based on the
5. This refers to how the products, services and
assumption that there is a hypothetical
the company itself is set apart from other complete understanding of its investment
competing market players. characteristics.
a. Competitive Position a. Fair Market Value
b. Cost Leadership
b. Going Concern Value
c. Differentiation c. Intrinsic Value
d. Focus d. Liquidation Value

6. It involves managing the firm’s capital 12. _____ is often used in valuation exercises
structure, including funding source and involving tax assessments.
strategies that the business should pursue to a. Fair Market Value
maximize firm value. b. Going Concern Value
a. Portfolio Management c. Intrinsic Value
b. Analysis of Business Transaction d. Liquidation Value
c. Corporate Finance
d. Legal and Tax Purposes
13. This value assumes that the entity will realize b. They help in identifying patterns and
assets and pay obligations in the normal trends for future projections.
course of business. c. They enable strategic decision-
a. Fair Market Value making, budgeting, and resource
b. Going Concern Value allocation.
c. Intrinsic Value d. They give an idea of how the industry
d. Liquidation Value operates.

14. It is the net amount that would be realized if 19. Which approach starts with a general
the business is terminated, and the assets perspective and then narrows down to a
are sold piecemeal. specific understanding?
a. Fair Market Value a. Top-down approach
b. Going Concern Value b. Bottom-up approach
c. Intrinsic Value c. Generalized approach
d. Liquidation Value d. Specific approach

15. The following are some red flags indicating 20. Which approach starts with specific details
aggressive accounting, except one: and progresses towards a general
a. Disputes or frequent changes with understanding?
auditors a. Top-down approach
b. Unusually high return provided by an b. Bottom-up approach
investment c. Neither, both approaches start with a
c. Excessive loans to company insiders general perspective
d. Pressure to meet debt covenants or d. Both approaches follow the same
earnings expectations process

16. What is the primary goal of valuation? 21. It is a role of valuation that largely depends
a. Determining the estimated value of on the investment objectives of the investors
an asset or financial managers managing the
b. Assessing the financial performance investment portfolio.
of a business a. Legal and Tax Purposes
c. Analyzing market conditions and b. Corporate Finance
potential future outcomes c. Portfolio Management
d. Evaluating the importance or price of d. Analysis in Business Transactions
an investment
22. It is under Portfolio Management that usually
17. Which aspect of business assessment “do takeovers.”
focuses on analyzing market trends, industry a. Activists Investors
developments, competitive landscape, b. Fundamental Analysis
technological advancements, and the c. Chartists
company’s own capabilities and resources. d. Information Traders
a. Current Operations
b. Future Prospects 23. What are the two valuation techniques?
c. Embedded Risks a. Sell-side analyst and buy-side
d. None of the Above analyst
b. Stock Selection and Deducting
18. Why is it important to include earnings, cash Market Expectation
flow, and balance sheet forecasts when c. Passive and Active Investors
conducting comprehensive financial d. Portfolio Management and Activists
forecasting? Investors
a. They provide insights into historical
financial performance.
24. It is under Portfolio Management, that is
interested in understanding and measuring
the intrinsic value of a firm.
a. Activists Investors
b. Fundamental Analysis
c. Chartists
d. Information Traders
a. Preparing Valuation Model based on
Forecasts
b. Selecting the Right Valuation Model
c. Sensitivity Analysis
d. Situational Adjustments

25. It is under Portfolio Management that relies

on the concept that stock prices are
significantly influenced by how investors
think and act.
a. Activists Investors
b. Fundamental Analysis
c. Chartists
d. Information Traders

26. General term which describes the

transaction wherein two companies had their
assets combined to form a wholly new entity.
a. Spin-off
b. Merger
c. Leveraged buyout
d. Acquisition

27. It needs to determine the fair value of the

target company prior to offering a bid price.
a. Selling firm
b. Buying firm
c. Both a and b
d. None of the above

28. It should have a sense of its firm value to

gauge reasonableness of bid offers.
a. Selling firm
b. Buying firm
c. Both a and b
d. None of the above

29. The potential increase in firm value that can

be generated once two firms merge with
each other.
a. Divestiture
b. Control
c. Acquisition
d. Synergy

30. It is a common methodology in valuation

exercises wherein multiple analyses are
done to understand how changes in an input
or variable will affect the outcome (i.e., firm
value).
VALUATION, CONCEPTS, AND b. Resources
c. Requipments
METHODOLOGIES d. Checks

QUIZ 2 – BFAC01 8. Which of the following is true in the steps of

1. What is the denominator in the calculation
of book value per share?
a. Weighted Average Outstanding
Shares
b. Number of Issued Shares
c. Number of Outstanding Shares
d. Number of Authorized Shares
determining value using the reproduction
value method?
a. Conduct reproduction costs analysis
on all assets
b. Adjust the book values to
reproduction costs values
c. Apply the replacement value formula
d. All of the above

2. The reproduction value method requires

9. _____ is an estimate of cost of reproducing,
_____. creating, developing, or manufacturing of a
a. Size of the asset similar asset.
b. Reproduction Cost Analysis a. Replacement Value
c. Age of the Asset b. Book Value
d. Cost Equivalent c. Asset Based Valuation
d. Reproduction Value
3. What information can be used in the
reproduction value method?
10. Should be realized within operating cycle
a. Asset Based a. Current Liability
b. Limited Market b. Current Assets
c. Benchmark c. Non-Current Assets
d. Convenient d. Non-Current Liability

4. Receivable that are collectible after 60 days 11. Book Value be defined as?
are classified as
a. The price at which something can be
a. Current Assets sold in a particular market
b. Non-current Liabilities b. A method for determining what an
c. Current Liabilities insurance company will pay you in
d. Non-current Assets case your property is stolen or
destroyed
5. Cost of similar assets that have the nearest c. Value Recorded in the accounting
equivalent value as of the valuation date. records of a company.
a. Book Value
d. All of the above
b. Replacement Value
c. Fair Market Value 12. What is the formula in getting the value of
d. Reproduction Value an equity using the replacement value
method?
6. The factor that affects the replacement 𝑅𝑒𝑝𝑙𝑎𝑐𝑒𝑚𝑒𝑛𝑡 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡
value of an asset are the following except a.
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑆ℎ𝑎𝑟𝑒𝑠
a. Competitive advantage of an asset 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒+𝑅𝑒𝑝𝑙𝑎𝑐𝑒𝑚𝑒𝑛𝑡 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡
b.
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑆ℎ𝑎𝑟𝑒𝑠
b. Size of an Asset 𝑁𝑒𝑡 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 +/−𝑅𝑒𝑝𝑙𝑎𝑐𝑒𝑚𝑒𝑛𝑡 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡
c. Original acquisition cost of the asset c.
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑆ℎ𝑎𝑟𝑒𝑠
d. Asset age d.
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 −𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑆ℎ𝑎𝑟𝑒𝑠

7. Enterprise-Wide Risk Management: improve

management and distribution of _____
across the enterprise.
a. Money
13. In the replacement value method, we must 19. Jimmy Company revealed certain
adjust first the affected items and get their information in their statement of financial
replacement value to be able to get the position:
_____ on the second step of the
computation.
a. Adjusted Asset
b. Total Asset – Replacement Value
c. Net Book Value
d. Replacement Adjustment

14. What is the limitation of the book value

method? a. Php 190,000
a. It is affected by subjective b. Php 660,000
considerations to a market extent c. Php 600,000
b. It assumes the existence of a liquid d. Php 1,010,000
real estate market
c. It does not account for the value of 20. EFG Incorporated’s financial statements for
the net assets recorded in the books 2019 reported the following balances:
d. It offers convenient determination of
the company value

15. Asset Value is dependent on the economic

_____.
a. Condition
b. Events
c. Benefits
a. Php 2.15
d. State
b. Php 4.15
c. Php 0.44
16. _____ are investments that started from
d. Php
scratch.
a. Brown Field
21. The following data were gathered from the
b. Company
annual report of Thorn Products:
c. Green Field
d. Red Field

17. This will enable the valuator to determine

the costs related in order to upkeep a
similarly aged asset.
a. Age of the Asset
b. Replacement Value
c. Size of the Asset
d. Competitive advantage of the asset a. Php 30.00
b. Php 15.00
18. When determining replacement costs of c. Php 14.00
assets, valuators tend to consult with ____. d. Php 12.00
a. Actuaries
b. Board of Directors
c. Appraisers
d. Equity Analysts
22. Intense Corporation showed the following 25. How much is the net working capital as of
balances in its financial records as of December 31, 2020?
December 31: a. Php 247,500
b. Php 350,000
c. Php 497,500
d. Php 937,500

26. How much is the book value per share as of

December 31, 2020?
a. Php 1.93
b. Php 1.54
c. Php 1.25
a. Php 1.57 d. Php 1.00
b. Php 1.39
c. Php 1.37
d. Php 1.25

27. What is the book value of Samsam

Company?
23. How much is the book value of Hercules a. Php 5,250,000
Company as of December 31, 2019? b. Php 5,000,000
a. Php 1,250,000 c. Php 4,150,000
d. Php 4,000,000
24. How much is the book value per share in
2019? 28. What is the reproduction value of Samsam
a. Php 3.05 Company?
b. Php 2.15 a. Php 5,000,000
c. Php 1.65 b. Php 4,650,000
d. Php 1.25 c. Php 4,150,000
d. Php 4,000,000
29. How much is the book value per share of
Caramel Company?
a. Php 3.33
b. Php 4.87
c. Php 13.33
d. Php 14.87

30. How much is the replacement value of

Caramel Company at year end?
a. Php 584,000
b. Php 400,000
c. Php 1,748,000
d. Php 1,600,000
VALUATION, CONCEPTS, AND
METHODOLOGIES
QUIZ 1 – BFAC02
TRUE OR FALSE
T Value pertains to how much a particular
object is worth to a particular set of eyes.
T Value, in the point of view of a corporate
shareholder, relates to the difference
between cash inflows generated by an
investment and the cost associated with the
capital invested which captures both time
value of money and risk premium.
T Valuation techniques may differ across
different assets, but all follow similar
fundamental principles that drive the core of
these approaches
T Merger is the general term which describes
the transaction wherein two companies are
combined to form a wholly new entity.
T Fair market value is the price expressed in
terms of cash equivalents, at which property
would change hands between hypothetically
willing and able to buyer and a
hypothetically willing and able seller, acting
at arm's length in an open and unrestricted
market, when neither is under compulsion to
buy or sell and when both have reasonable
knowledge of the relevant facts.
T Valuation includes the use of forecasts to
come up with a reasonable estimate of the
value of an entity's assets or its equity.
T Intrinsic value refers to the value of any
asset based on the assumption assuming
there is a hypothetically complete
understanding of its investment
characteristics.
T Businesses treat capital as a scarce
resource that they should compete to obtain
and efficiently manage.
F Activity investors usually do "takeovers" -
they use their equity holdings to push old
management out of the company and
change the way the company is being run.
T Leverage buyout is the acquisition of
another business by using significant debt
which uses the acquired business as a
collateral.
T Going concerned firm value is determined
under the going concern assumption. The
going concern assumption believes that the
entity will continue to do its business
activities into the foreseeable future.
F According to the CFA Institute, valuation is
the estimation of an asset's value based on
variables perceived to be related to future
investment returns, on comparisons with
similar assets, or, when relevant, on
estimates of immediate liquidation process.
T Value is impacted by liquidity.
T Liquidation value is the net amount that
would be realized if the business is
terminated, and the assets are sold
piecemeal.
T As valuation mostly deals with projections
about future events, analysts should hone
their ability to balance and evaluate different
assumptions used in each phase of the
valuation exercise, assess validity of
available empirical evidence and come up
with rational choices that aligns with the
ultimate objective of the valuation activity.
1. This refers to the value of any asset based
on the assumption that there is hypothetically
complete understanding of its investment
characteristic.
a. Intrinsic Value
b. Fair Market Value
2. This refers to the possible range of values
where the real firm value lies.
a. Solvency
b. Uncertainty
3. The relevance of valuation largely depends
on the investment objectives of the investors
or financial managers managing the
investment portfolio.
a. Corporate Finance
b. Portfolio Management
4. Deals with prioritizing and distributing
financial resources to activities that
increases firm value by appropriate planning
and the implementation of resources while
balancing profitability and risk appetite.
a. Corporate Finance
b. Risk Management
5. General term which describes the
transaction of two companies combined to
form a wholly new entity.
a. Mergers
b. Divestiture
6. Usually has two parties: the buying firm and
the selling firm. The buying firm needs to
determine the fair value of the target
company prior to offering a bid price. On the
other hand, the selling firm (or sometimes,
the target company) should have a sense of
its firm value as well as to gauge
reasonableness of bid offers.
a. Acquisition
b. Merger
7. Refer to the characteristics of an entity
related to its financial strengths, profitability,
or risk appetite.
a. Financial Value
b. Fundamentals
8. This pertains to how much a particular object
is worth a particular set of eyes.
a. Value
b. Price
14. The price expressed in terms of cash
equivalents, at which property would change
hands between a hypothetical willing and
able buyer and a hypothetical willing and
able seller, acting at arm's length in an open
and unrestricted market, when neither is
under compulsion to buy or sell and when
both have reasonable knowledge of the
relevant facts.
a. Fair Market Value
b. Intrinsic Value
15. One major factor linked to the value of
business that shows how is the operating
performance of the firm in the recent year.
a. Future Prospects
b. Current Operations

9. Tend to look for companies with good growth

prospects that have poor management.
a. Activists Investors
b. Chartists

10. According to the CFA Institute, is the

estimation of an asset's value based on
variables perceived to be related to future
investment returns, on comparisons.
a. Appraisal
b. Valuation

11. They believe that these metrics imply

investor psychology and will predict future
movements in stock prices.
a. Chartists
b. Information Traders

12. Value is determined under the going concern

assumption.
a. Liquidation Value
b. Going Concern Value

13. Sale of a major component or segment of a

business (e.g. brand or product line) to
another company is called.
a. Acquisition
b. Divestiture
VALUATION, CONCEPTS, AND
METHODOLOGIES
QUIZ 2 – BFAC02
TRUE OR FALSE
T Asset has been defined by the industry as
transactions that would yield future
economic benefits as a result of past
transactions
F Brown field investment is the term used to
describe businesses that are starting from
scratch
F Enterprise-wide risk management allows the
company to increase performance variability
T Risk identification is important to allow
investors to assess impact of the risk to their
investment
T Brown field investments are easier to
evaluate as information is already available
from prior years
T Book value is the term used to describe the
value derived from the amounts reflected in
the financial statements
F Borrowings that are contracted to be paid
after 24 months is classified as current
liabilities
T Equipment is classified as non-current
assets
T Replacement cost is the cost of similar
assets that have the nearest value as the
valuation date
T Replacement value is affected by asset age,
size and its competitive advantage
T Insurance companies use replacement
value as basis to determine the appropriate
insurance premium to be charged to the
clients
T For real properties, it is more important to
look at the age of the asset than its size.
T Replacement value method is superior to
book value as it gives an indication of true
value of the firm as of the valuation date
F Replacement value is an estimate cost of
the of reproducing, creating, developing or
manufacturing a similar asset
T If there is no comparable assets found in the
market, it is more appropriate to use
reproduction value method
1. Receivables that are collectible after 60 days
are classified as
a. Non-current Liabilities
b. Current Assets
2. The net book value of assets may also
represents
a. Total shareholder's equity
b. Total assets
3. Book value also reflects the company's
a. Historical value
b. Fair market value
4. 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
5. Cost of similar assets that have the nearest
equivalent value as of the valuation date.
a. Book value
b. Replacement cost
6. The factor that affects the replacement value
of an asset are the following except
a. Competitive advantage of the asset
b. Original acquisition cost of the asset
7. Reproduction value is the
a. Estimate of cost of reproducing,
creating, developing or
manufacturing a similar asset
internally
b. Salvage value of the asset
8. What is the limitation imposed by the use of
the reproduction value method?
a. High professional fees of appraisers
b. Difficulty in validating
reasonableness of calculated value
because of limited comparators
9. The following methods shows the most
recent value of the firm assets in the market
as of the valuation date, except
a. Reproduction value method
b. Book value method
10. When computing for book value, which of the
following items should be deducted the asset
value?
a. Total liabilities
b. Total shareholders equity

11. These are examples of methods under this

asset based valuation, except:
a. Liquidation Value Method
b. Income Value Method

12. This has been defined by the industry as

transactions that would yield future economic
benefits as a result of past transactions.
a. Equity
b. Asset

13. These are investments which are already in

the going concern state, as 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

14. When determining replacement costs of

assets, valuators tend to consult with
a. Appraisers
b. Equity Analysts

15. 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