ASA BV 201 EXAM 2025 QUESTIONS AND DETAILED
CORRECT ANSWERS (VERIFIED ANSWERS) | A+
GRADE
Principle of Substitution - ANS -a prudent buyer will pay no more for a property than it
would cost to acquire a substitute property with the same utility
How is a Fairness Opinion different than a FMV? - ANS -A Fairness Opinion goes
further than a FMV by assessing whether a transaction is fair between all ownership
entities. It also serves as an insurance policy for the transacting parties.
Which two valuation methods are based on the principle of substitution? - ANS -Market
and Asset (Cost)
What is an "arm's-length" transaction? - ANS -One in which both parties have the ability
to negotiate.
Market conditions that affect impact of the Bargaining of Suppliers: - ANS -Supplier
integration
Availability of substitute products
Importance of supplier's input to buyer
Supplier's product differentiation
Importance of industry to suppliers
Customer's switching costs to other input
Customer's threat of backward/forward integration
Suppliers are POWERFUL if: - ANS -Credible forward integration threat by suppliers
Suppliers concentrated
Significant cost to switch suppliers
Weak customers
Suppliers are WEAK if: - ANS -Many competitive suppliers
Purchase commodity products
Credible backward integration threat by customers
Concentrated customers
Powerful customers
Factors that affect Competitive Rivalry Among Existing Firms: - ANS -Number/size of
competitors
Industry growth rate
Fixed vs variable costs
Product differentiation
Customer switching costs
Diversity of competitors
Exit barriers
, Strategic stakes
Competitive responses to rivalry - ANS -Changing prices
Improving product differentiation
Using channels of distribution
Exploiting relationships with suppliers
3 Generic strategies for competing: - ANS -Overall cost leadership
Differentiation from competitors
Focus on a particular customer group
What are the 4 types of company analysis - ANS -1. Economic/Political
2. Industry
3. Operational
4. Financial
An increase in an asset account is a _____ cash flow and __creases cash on hand -
ANS -negative
decreases (buying a building)
An increase in a liability account is a _____ cash flow and __creases cash on hand -
ANS -positive
increases (borrowing money from a bank)
What is the purpose of liquidity ratios? - ANS -To measure the ability of company to
meet short-term obligations
What is the Current Ratio? - ANS -Current Assets / Current Liabilities
What is the Quick Ratio? - ANS -Cash, Equivalents, and Receivables / Current
Liabilities
Working Capital Turnover? - ANS -Sales / Working Capital
What is the purpose of activity ratios? - ANS -Measure how effectively a company
employs its assets
Inventory Turnover? - ANS -COGS / Inventory
Calculate COGS - ANS -Beginning Inventory + Inventory Purchases - Ending Inventory
or
Gross Profit - Sales
A/R Turnover? - ANS -Sales / A/R
CORRECT ANSWERS (VERIFIED ANSWERS) | A+
GRADE
Principle of Substitution - ANS -a prudent buyer will pay no more for a property than it
would cost to acquire a substitute property with the same utility
How is a Fairness Opinion different than a FMV? - ANS -A Fairness Opinion goes
further than a FMV by assessing whether a transaction is fair between all ownership
entities. It also serves as an insurance policy for the transacting parties.
Which two valuation methods are based on the principle of substitution? - ANS -Market
and Asset (Cost)
What is an "arm's-length" transaction? - ANS -One in which both parties have the ability
to negotiate.
Market conditions that affect impact of the Bargaining of Suppliers: - ANS -Supplier
integration
Availability of substitute products
Importance of supplier's input to buyer
Supplier's product differentiation
Importance of industry to suppliers
Customer's switching costs to other input
Customer's threat of backward/forward integration
Suppliers are POWERFUL if: - ANS -Credible forward integration threat by suppliers
Suppliers concentrated
Significant cost to switch suppliers
Weak customers
Suppliers are WEAK if: - ANS -Many competitive suppliers
Purchase commodity products
Credible backward integration threat by customers
Concentrated customers
Powerful customers
Factors that affect Competitive Rivalry Among Existing Firms: - ANS -Number/size of
competitors
Industry growth rate
Fixed vs variable costs
Product differentiation
Customer switching costs
Diversity of competitors
Exit barriers
, Strategic stakes
Competitive responses to rivalry - ANS -Changing prices
Improving product differentiation
Using channels of distribution
Exploiting relationships with suppliers
3 Generic strategies for competing: - ANS -Overall cost leadership
Differentiation from competitors
Focus on a particular customer group
What are the 4 types of company analysis - ANS -1. Economic/Political
2. Industry
3. Operational
4. Financial
An increase in an asset account is a _____ cash flow and __creases cash on hand -
ANS -negative
decreases (buying a building)
An increase in a liability account is a _____ cash flow and __creases cash on hand -
ANS -positive
increases (borrowing money from a bank)
What is the purpose of liquidity ratios? - ANS -To measure the ability of company to
meet short-term obligations
What is the Current Ratio? - ANS -Current Assets / Current Liabilities
What is the Quick Ratio? - ANS -Cash, Equivalents, and Receivables / Current
Liabilities
Working Capital Turnover? - ANS -Sales / Working Capital
What is the purpose of activity ratios? - ANS -Measure how effectively a company
employs its assets
Inventory Turnover? - ANS -COGS / Inventory
Calculate COGS - ANS -Beginning Inventory + Inventory Purchases - Ending Inventory
or
Gross Profit - Sales
A/R Turnover? - ANS -Sales / A/R
