NURSING TEST

Fin Midterm Questions and Answers 1. Which of the following best describes why the Valuation Principle is a key concept in making financial decisions? It shows how to make the costs and benefits of a decision comparable so that we can weigh them properly. 2. Which of the following is typically the major factor in limiting the growth of sole proprietorships? The amount of money that can be raised by such firms is limited by the fact that the single owner must make good on all debts. ...

NACVA FINAL Questions and Answer A The market approach is frequently referred to by what other professional discipline's approach? a. Sales comparison approach used by realtors b. Automotive dealer "best deal" approach c. Broker's Commodity pricing model d. Black Scholes valuation methodology D In order to convert a Market Value of Invested Capital to an Equity Value, the valuation professional must do which of the following? a. Add the value of working capital b. Add...

Pros and Cons of each Valuation method Questions and Answers Pros of DCF theoretically the most sound valuation based on intrinsic values Less influenced by the temperaments of the current market Can value components of the business or synergies separately Cons of DCF Pvs are sensitive to assumptions and the methods you use Terminal value is large portion of the valuation and very sensitive Need realistic projected financial statements over 5-10 years Trading Comps Pros Bas...

Financial Statement Analysis Questions and Answers A financial analyst is required to analyze the financial statements of Alliah Company. While analyzing, the analyst discovered that the company does not have adequate current assets to meet its total current liabilities. Thus, the company might face difficulties in meeting its upcoming payments toward its current liabilities. Which method did the financial analyst use to make this analysis? The financial analyst calculated various short-ter...

Venture Capital Theory Questions and Answers What is meant by a capitalization (or cap) rate in reference to calculating a terminal value? What other types of terminal values might be appropriate (i.e., other than smooth growth procedures)? Dividing by the cap rate (r - g) in the perpetuity formula is the appropriate mathematical simplification for discounting (at rate r) a perpetual series of cash flows growing smoothly (at rate g). It is mathematically equivalent to the infinite sum of the d...

Chapter 19 Forensics Questions and answers Which of the following would not be the subject of business valuation? a. Corporations. b. Trusts. c. Plant and equipment. d. All of the above are the subject of business valuation. d. All of the above are the subject of business valuation. Correct. Which of the following is not among the desired characteristics of business valuations? a. Source and use. b. Consistency. c. Defensibility. d. All of these are desired characteristics of b...

Introduction to Business Valuation Questions and Answers Why perform a valuation? - selling a business - acquiring a business - raising money - investment recommendations - internal business decision making - impairment testing - valuing employee options and compensation - bankruptcy estate planning - litigation Factors to consider for a valuation - company management -industry & competition -threats and challenges -microeconomic environment -macroeconomic environment ...

FIN 674 - M&A Quiz 3 (Cash Flows) Questions and Answers correct A valuation model based on the cash flows that a firm will have available to pay dividends in the future is best characterized as a(n): Free cash flow to equity model (T/F) A "constant" growth rate is called a stable growth rate and cannot be higher than the growth rate of the economy in which the firm operates. True (T/F) The stable growth rate cannot be negative. False In forecasting free cash flows...

Chapter12. Risk, Cost of Capital, and Valuation The weights used in the computation of a project's flotation costs should be based on the: the company's target debt-to-equity ratio. A firm with high operating leverage is best defined as a firm that has: high fixed costs relative to variable costs. What value should you assign as the flotation cost of internally generated equity financing? A cost of zero The beta of a security provides an estimate of the: character...

CHAPTER 7 FINANCIAL STATEMENT ANALYSIS Questions and Answers The fundamental approach to business valuation uses 1. Industry and economy-wide data. 2. Data from a firm's financial statements. __________ __________ assessment plays a central role in measuring a company's credit risk. Cash flow Rank the steps involved in valuing a company 1. Forecasting future amounts of some financial attribute. 2. Determining the risk associated with the forecasted future amounts. 3. D...

Financial Modeling Questions and Answers How would you forecast revenues? There are two approaches to model building — making your model realistic, or keeping it simple and robust. The first principles approach identifies various methods to model revenues with high degrees of detail and precision. There are also industry-specific considerations that need to be taken into account. For instance, when forecasting revenue for the retail industry, you will forecast expansion rate and derive inco...

Stock Valuation Questions and Answers Common Stock Represents ownership in a publicly held company. Common Stock Claims & Liability Common stockholders have a residual claim on the firm's assets. Common stockholders have limited liability. Profit & Stock Value Higher profits increase a stock's value and lower profits decrease its value, in a direct relationship. Stocks & Interest Rates Higher interest rates decrease market value and lower yields and lower interest...

L2, R25 Market Based Valuation Price and Enterprise Value Multiples Questions and Answers T/F: Enterprise multiples differ from price multiples because instead of using the market price in the numerator (equity price), EV uses the value of the company in the numerator (equity and debt) True Momentum indicators Relate either price or a fundamental value to a time series of its own past values or to its expected value T/F: The method of comparables is based on the law of one price...

Private Company Valuation Questions and Answers The characteristics that distinguish private and public companies can be delineated into: Company-specific and stock-specific factors. Overall, company-specific factors can have positive or negative effects on private company valuations, whereas stock-specific factors are usually a negative. Compared to public companies, private companies have greater heterogeneity so that the appropriate discount rates and methods for valuing them vary widely as...

Asset Valuation Exam 1 Questions and Answers Operating activities Activities directly related to the provision of goods and services to customers Investing activities Activities that provide productive capacity to facilitate future operating activities What is price of stock formula? the summation of all dividends discounted back: summation: (cash dividend + stock repurchases - Equity Issuances) / (1+r)^t Financing activities Activities to fund operating and investin...

Other Valuation Questions and Answers When we say we "triangulate" to a value, what does that mean? What methods might we use? When valuing a business, we typically look at multiple valuation approaches (DCF, Trading Comps, Transaction Comps, LBO, etc.) and make a judgment call about the most appropriate valuation range. What is Terminal Value? Reflects the discounted value of all Cash Flow beyond the explicit projection project period (Stage 1) for a DCF analysis. Why...

Business Valuation Final Questions and Answers The primary methods used to calculate the value of privately held business interests in the income approach are: a. Capitalization of Earnings/ Cash Flows Method and Excess Earnings/Treasury Method b. Excess Earnings/Treasury Method and Discounted Earnings/Cash Flows Method c. Capitalization of Earnings/Cash Flows Method and Discounted Earnings/Cash Flows Method d. Discounted Earnings/Cash Flows Method and Price/EBITDA Method C Genera...

IB Prep - Valuation Qs Questions and Answers What are the 3 major valuation methodologies? Comparable companies, precedent transactions, and discounted cash flow analysis. Rank the 3 valuation methodologies from highest to lowest expected value. Trick question--there is no ranking that always holds. In general, precedent transactions will be higher than comparable companies due to the control premium built into acquisitions. Beyond that, a DCF could go either way and it's best to...

BIWS Valuation Guide Questions and Answers Why is P/E is the worst multiple (3)? -it includes non cash charges, is impacted by tax rates, and is not capital structure neutral Why don't we use FCF multiples even though they're more accurate than EBITDA or EBIT multiples (2)? -takes more time to calculate (convenience) -may not be standardized because companies include different items in the CFO in the SCF (comparability) Book Value is another word for shareholders' equ...

Valuation Exam 3 Questions and Answers matching discount rate and CFs -wacc is for expected cash flows -promised CFs need a higher discount rate b/c don't incl. risk -rf rate is for CFs from forward (market prices) why are PE hurdle rates so high? -very risky investments -PE firm provides expertise -hoped for CFs, not expected -opportunity costs -liquidity premium adjusted valuation process -focus on terminal value -CF insignificant in early periods -negotiate owners...