CERTIFIED VALUATION ANALYST (CVA)
EXAMINATION QUESTION AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2026 Q&A INSTANT
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1. Which valuation approach is most appropriate for valuing a profitable,
operating company with stable earnings?
A. Cost approach
B. Asset-based approach
C. Market approach
D. Income approach
Rationale: The income approach best captures the value of a going
concern by converting future economic benefits into present value.
2. The primary purpose of normalization adjustments is to:
A. Reduce taxable income
B. Eliminate accounting errors
C. Reflect the true economic earnings of the business
D. Increase reported profit
Rationale: Normalization removes non-recurring, discretionary, or non-
operating items to reflect sustainable earnings.
3. Which discount rate reflects the required return to all capital providers?
A. Cost of equity
B. Risk-free rate
C. Weighted average cost of capital (WACC)
D. Internal rate of return
, Rationale: WACC incorporates both debt and equity returns weighted by
capital structure.
4. A control premium is most commonly associated with:
A. Minority interest valuations
B. Liquidation analysis
C. Acquisition of a controlling interest
D. Distressed sales
Rationale: Control premiums reflect added benefits of control such as
decision-making authority.
5. Which method estimates terminal value by applying a multiple?
A. Gordon Growth Model
B. Discounted cash flow
C. Exit multiple method
D. Excess earnings method
Rationale: Exit multiples apply a valuation multiple to final-year financial
metrics.
6. The capitalization of earnings method assumes:
A. Negative growth
B. Highly volatile cash flows
C. Stable, perpetual earnings
D. Finite project life
Rationale: Capitalization is suitable when earnings are expected to remain
stable indefinitely.
7. Which document most often defines the standard of value?
A. Engagement letter
B. Financial statements
C. Purpose of the valuation
D. Appraisal report format
Rationale: The standard of value depends on the valuation’s purpose (e.g.,
fair market value).
, 8. Fair market value assumes a transaction between:
A. Related parties
B. Forced sellers
C. Willing buyer and willing seller
D. Court-appointed parties
Rationale: FMV requires no compulsion and reasonable knowledge by
both parties.
9. Which risk is diversified away in a portfolio?
A. Market risk
B. Inflation risk
C. Unsystematic risk
D. Interest rate risk
Rationale: Unsystematic risk is company-specific and diversifiable.
10.Beta measures:
A. Liquidity
B. Credit risk
C. Systematic risk relative to the market
D. Total volatility
Rationale: Beta reflects sensitivity to market movements.
11.Which financial statement best reflects liquidity?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Rationale: Liquidity is derived from current assets and liabilities.
12.EBITDA is commonly used because it:
A. Reflects GAAP net income
B. Includes financing decisions
C. Approximates operating cash flow
D. Eliminates taxes permanently
Rationale: EBITDA removes non-operating and non-cash effects.
EXAMINATION QUESTION AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2026 Q&A INSTANT
DOWNLOAD PDF
1. Which valuation approach is most appropriate for valuing a profitable,
operating company with stable earnings?
A. Cost approach
B. Asset-based approach
C. Market approach
D. Income approach
Rationale: The income approach best captures the value of a going
concern by converting future economic benefits into present value.
2. The primary purpose of normalization adjustments is to:
A. Reduce taxable income
B. Eliminate accounting errors
C. Reflect the true economic earnings of the business
D. Increase reported profit
Rationale: Normalization removes non-recurring, discretionary, or non-
operating items to reflect sustainable earnings.
3. Which discount rate reflects the required return to all capital providers?
A. Cost of equity
B. Risk-free rate
C. Weighted average cost of capital (WACC)
D. Internal rate of return
, Rationale: WACC incorporates both debt and equity returns weighted by
capital structure.
4. A control premium is most commonly associated with:
A. Minority interest valuations
B. Liquidation analysis
C. Acquisition of a controlling interest
D. Distressed sales
Rationale: Control premiums reflect added benefits of control such as
decision-making authority.
5. Which method estimates terminal value by applying a multiple?
A. Gordon Growth Model
B. Discounted cash flow
C. Exit multiple method
D. Excess earnings method
Rationale: Exit multiples apply a valuation multiple to final-year financial
metrics.
6. The capitalization of earnings method assumes:
A. Negative growth
B. Highly volatile cash flows
C. Stable, perpetual earnings
D. Finite project life
Rationale: Capitalization is suitable when earnings are expected to remain
stable indefinitely.
7. Which document most often defines the standard of value?
A. Engagement letter
B. Financial statements
C. Purpose of the valuation
D. Appraisal report format
Rationale: The standard of value depends on the valuation’s purpose (e.g.,
fair market value).
, 8. Fair market value assumes a transaction between:
A. Related parties
B. Forced sellers
C. Willing buyer and willing seller
D. Court-appointed parties
Rationale: FMV requires no compulsion and reasonable knowledge by
both parties.
9. Which risk is diversified away in a portfolio?
A. Market risk
B. Inflation risk
C. Unsystematic risk
D. Interest rate risk
Rationale: Unsystematic risk is company-specific and diversifiable.
10.Beta measures:
A. Liquidity
B. Credit risk
C. Systematic risk relative to the market
D. Total volatility
Rationale: Beta reflects sensitivity to market movements.
11.Which financial statement best reflects liquidity?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Rationale: Liquidity is derived from current assets and liabilities.
12.EBITDA is commonly used because it:
A. Reflects GAAP net income
B. Includes financing decisions
C. Approximates operating cash flow
D. Eliminates taxes permanently
Rationale: EBITDA removes non-operating and non-cash effects.
