CVA Practice Exam With Complete
Questions And Correct Detailed Answers
|Already Graded A+(Newest Version!)
In order to carry out due diligence according to the Professional Standards, what
is a reasonable amount of time that it should take to complete a typical valuation
engagement? - ANSWER>>30 - 60 days.
Which of the following are benefits to a company that can be derived from a
valuation engagement? - ANSWER>>All of these are benefits of valuations.
Valuators need to be able to thoroughly and clearly explain the approaches used
in their reports in litigation, but not the opposing side's approaches, as opposing
counsel's valuator will explain those to the court. - ANSWER>>False.
NACVA and AICPA are completely separate and competing organizations which
share nothing between each other. - ANSWER>>False.
As long as a valuator has significant years' experience, this will be enough to
qualify the valuator as an expert in a Daubert challenge - ANSWER>>False.
Which IRS pronouncement is referred to as the "excess earnings method"? -
ANSWER>>RR 68-609
Which IRS pronouncement introduced the concept of Goodwill? - ANSWER>>ARM
34
Which IRS pronouncement sets forth a methodology to value certain
compensatory stock options? - ANSWER>>RR 98-34
,Which body issues regulations pertaining to Employee Stock Ownership Plans
(ESOP)? - ANSWER>>DOL.
Which factors have dramatically expanded the demand for business valuation? -
ANSWER>>Economic Instability and Age demographics
What are the 3 approaches to a valuation? - ANSWER>>Asset, market, going-
concern
Is valuation an art or a science? - ANSWER>>Both.
What event in the 1920s forced the need for valuations of closely held
businesses? - ANSWER>>prohibition.
Which standard provides authoritative guidance for gift, estate and inheritance
taxes? - ANSWER>>RR 59-60.
An opinion of value is intended by the Professional Standards to be the most
unambiguous expression of a conclusion of value. - ANSWER>>An opinion of value
is not defined nor referred in the professional standards effective January, 1 2011.
In litigation related engagements, if the valuation analyst is required to provide a
written report, what reporting standards apply? - ANSWER>>Whether the analyst
needs to provide a written report and what form such written report should take,
depends upon the agreement between the client(s) and the analyst. No other
standards apply.
In determining the value of an enterprise. - ANSWER>>Remember to keep the
same standard of value throughout the report.
The three behavioral standards defined by NACVA are: - ANSWER>>General,
development, and reporting
, Match the ratio name with its correct value, using the information provided in the
financial statements above. - ANSWER>>Inventory turnover: 1.9
Return on equity: 16.5%
Days' sales in inventory: 190.1
Current ratio: 1.9
Quick ratio: 0.9
Times interest earned (using textbook's formula): 6.2
The valuation date is/are which of the following? - ANSWER>>The effective date
of the valuation.
In valuing a business, most analysts agree that only facts known or knowable at
the valuation date should be considered. - ANSWER>>True.
Which of the following statements concerning research is/are true?
I. Analysts should start with a plan.
II. 10-K's of public companies are good sources of industry information.
III. The author and publisher of information is not important as long as the
information is good.
IV. Trade associations are poor sources of information since they are biased. -
ANSWER>>I and II
The green book contains economic information through reports from interviews
with key business professionals, economists, and so on. - ANSWER>>False.
Which of the following is not a step in financial statement analysis? -
ANSWER>>Discount for lack of marketability
Only audited statements can be used in a valuation. - ANSWER>>False.
Which of the following is false concerning ratio analysis? - ANSWER>>They can be
subject to size effects when comparing small companies to large companies.
Questions And Correct Detailed Answers
|Already Graded A+(Newest Version!)
In order to carry out due diligence according to the Professional Standards, what
is a reasonable amount of time that it should take to complete a typical valuation
engagement? - ANSWER>>30 - 60 days.
Which of the following are benefits to a company that can be derived from a
valuation engagement? - ANSWER>>All of these are benefits of valuations.
Valuators need to be able to thoroughly and clearly explain the approaches used
in their reports in litigation, but not the opposing side's approaches, as opposing
counsel's valuator will explain those to the court. - ANSWER>>False.
NACVA and AICPA are completely separate and competing organizations which
share nothing between each other. - ANSWER>>False.
As long as a valuator has significant years' experience, this will be enough to
qualify the valuator as an expert in a Daubert challenge - ANSWER>>False.
Which IRS pronouncement is referred to as the "excess earnings method"? -
ANSWER>>RR 68-609
Which IRS pronouncement introduced the concept of Goodwill? - ANSWER>>ARM
34
Which IRS pronouncement sets forth a methodology to value certain
compensatory stock options? - ANSWER>>RR 98-34
,Which body issues regulations pertaining to Employee Stock Ownership Plans
(ESOP)? - ANSWER>>DOL.
Which factors have dramatically expanded the demand for business valuation? -
ANSWER>>Economic Instability and Age demographics
What are the 3 approaches to a valuation? - ANSWER>>Asset, market, going-
concern
Is valuation an art or a science? - ANSWER>>Both.
What event in the 1920s forced the need for valuations of closely held
businesses? - ANSWER>>prohibition.
Which standard provides authoritative guidance for gift, estate and inheritance
taxes? - ANSWER>>RR 59-60.
An opinion of value is intended by the Professional Standards to be the most
unambiguous expression of a conclusion of value. - ANSWER>>An opinion of value
is not defined nor referred in the professional standards effective January, 1 2011.
In litigation related engagements, if the valuation analyst is required to provide a
written report, what reporting standards apply? - ANSWER>>Whether the analyst
needs to provide a written report and what form such written report should take,
depends upon the agreement between the client(s) and the analyst. No other
standards apply.
In determining the value of an enterprise. - ANSWER>>Remember to keep the
same standard of value throughout the report.
The three behavioral standards defined by NACVA are: - ANSWER>>General,
development, and reporting
, Match the ratio name with its correct value, using the information provided in the
financial statements above. - ANSWER>>Inventory turnover: 1.9
Return on equity: 16.5%
Days' sales in inventory: 190.1
Current ratio: 1.9
Quick ratio: 0.9
Times interest earned (using textbook's formula): 6.2
The valuation date is/are which of the following? - ANSWER>>The effective date
of the valuation.
In valuing a business, most analysts agree that only facts known or knowable at
the valuation date should be considered. - ANSWER>>True.
Which of the following statements concerning research is/are true?
I. Analysts should start with a plan.
II. 10-K's of public companies are good sources of industry information.
III. The author and publisher of information is not important as long as the
information is good.
IV. Trade associations are poor sources of information since they are biased. -
ANSWER>>I and II
The green book contains economic information through reports from interviews
with key business professionals, economists, and so on. - ANSWER>>False.
Which of the following is not a step in financial statement analysis? -
ANSWER>>Discount for lack of marketability
Only audited statements can be used in a valuation. - ANSWER>>False.
Which of the following is false concerning ratio analysis? - ANSWER>>They can be
subject to size effects when comparing small companies to large companies.
