EMT Practice Test

1. Question Content...

---

Question1: Once in a while, someone perhaps a broker trying to sell a business quotes return on equity computed on a pretax basis. This definition can be very misleading, since:

Question2: For valuation purposes, the measurement of economic income to be analyzed can be defined in several different ways. Different measurements of economic income that are commonly analyzed in this approach include the following EXCEPT:

Question3: Which of the following is NOT out of the characteristics that must be present in a transaction while valuing recapitalizations and senior equity interests under Section 2701?

Question4: The purpose of risk analysis is to ascertain the uncertainty of the income flows to the company's various suppliers. Generally, there are two classes of the capital suppliers those that provide equity capital and receive a fixed return and those:

Question5: It is possible to examine the uncertainty of income to the various suppliers of capital by investigating the uncertainty of income to the company. The greater the uncertainty of income to the company:

Question6: The IRC limits an individual taxpayer's charitable deduction each year to a percentage of adjusted gross income, depending on:

Question7: It is possible (although not very common) for a security to have a negative beta (i.e. a beta less than zero).
Such a beta would indicate that:

Question8: One consideration in the choice between the cross purchase versus redemption form of buy-sell agreement is:

Question9: The amount of detail desired in the inventory list varies from one appraisal to another, depending upon:

Question10: 1. Obtain or develop a cost-basis balance sheet
2. Determine which assets and liabilities on the cost-basis balance sheet require a revaluation adjustment
3. Identify off-balance sheet intangible assets or contingent liabilities that should be recognized and valued
4. Identify off-balance sheet or contingent liabilities that should be recognized and valued
5. Estimate the value of the various asset and liability accounts identified in steps 2 through 4
6. Construct a value-basic balance sheet, based on the indicated values concluded during step 1 through
5, and quantify the subject value All these above statements are the steps of:

Question11: _____________ is the method that produces the largest, quickest depreciation deductions is the one most often selected by closely held businesses, since they are most eager to minimize reported taxable income.

Question12: One of the most controversial and unsettled issues in business valuation today is, the valuation of:

Question13: When preparing a business valuation for reorganization proceedings under bankruptcy statues, the parties will frequently rely on___________.

Question14: Several factors influence __________________, particularly:
1. The proximity of the valuation date to the fiscal year-end
2. The quality of the interim statements
3. The importance of seasonality to the subject company
4. The extent to which information in interim statements is likely to affect the affect the conclusion

Question15: Accepted business valuation approaches and methods are all of the following EXCEPT:

Question16: Any Buy-Sell agreement, restrictions, or other similar factor relating to the right to use or sell the property will be ignored for estate gift, and generation skipping tax purposes unless the agreement meets any of the following test EXCLUDING:

Question17: Control shares are normally more valuable than minority shares because they contain a bundle of rights that minority shares do not enjoy. Below is a list of some of the rights. Which of the following is NOT out of such rights?

Question18: If one assumes that the business will continue indefinitely as a viable going concern after the number of years for which discrete projections were made, the procedure/s commonly used to estimate the terminal value at the end of discrete projection period is/are:

Question19: Which of the following is NOT out of the call option's value?

Question20: Because of the advanced features (protected by the several patents), Seller management estimates that:

Question21: Which one of the following is NOT always clearly defined? Therefore, if the term is used, it should be supplemented by a definition of exactly what it means in the given valuation context.

Question22: _________________ is computed by reverse re-engineering the price of a publicly traded option on the same underlying stock. This is the one when used in the Black-Scholes model along with the other four known variables results in a calculated value that matches the market price of the publicly traded options.

Question23: The FASB says that, for "unobservable inputs," the valuation should include market participant assumptions about risk, even if this adjustment is different to determine. Interestingly, it breaks risk into following categories EXCEPT:

Question24: When there is a choice among accounting practices, private companies tend towards a more conservative selection in order to minimize taxes, while public companies may account more aggressively in order to report:

Question25: Which of the following is NOT a common category of intangible assets?

Question26: "A takeover model became a significant explanatory variable for firms that had no coattail. A voting power model was a significant explanatory variable for firms that had coattail provision." This is the conclusion of:

Question27: Valuation of ___________must be specified. For example, the assignment might include language such as" ...engaged to estimate the fair market value of the fixed assets, inventory, and goodwill, on a going- concern basis of..."

Question28: Basic ways of approaching the valuation of non-controlling ownership interests are the following EXCEPT:

Question29: Fair value is:

Question30: Book value per share is based on the number of shares outstanding at the end of accounting period rather than the weighted average used in computing earnings per share. Also, book value normally is computed without considering:

Question31: Which of the following best suits in replacement to question marks from left to right respectively?

Question32: ____________ indicates that the collective going-on concern value of the total subject entity is less than the sum of the individual values of the entity's total tangible assets.

Question33: In measuring the business risk, for many companies, sales volatility is the most important determinant of the fluctuation of net income measured by the standard deviation. Although companies may have some control over annual sales volume, sales volatility is, to a considerable extent, a function of the:

Question34: The fundamental risk measures and their correlation coefficient with observed equity risk premiums are as follows EXCLUDING:

Question35: __________________ in context of Delware block method means value based on expected earnings and/ or dividends. It is akin to value based on the income approach in the three basic approaches to value. It may be arrived at by discounted cash flow (DCF), capitalization of earnings, or capitalization of dividends.

Question36: Which of the following is NOT the advantage of leasing to the lessee?

Question37: When is the guideline merged and acquired company method most useful?

Question38: Income that is eventually derived from the qualified stock option (QSO) is determined to be ordinary income if the receipt exercises the option to buy the underlying securities and subsequently sells the securities within 12 months. To get a tax break:

Question39: In case of valuation of family law courts, in fact, courts often mix standards of value with valuation methods. For example, one opinion recognized "fair acceptable methods" for valuing goodwill on the basis of:

Question40: The state of the art in the twenty-first century involves incorporating one or all of the following elements into the discount rate to reflect risk EXCEPT:

Question41: A seller who does not own a security (a short seller) will simply accept price of the security from the buyer and agree to settle with the buyer on some future date by paying him an amount equal to the price of the security on that date. While this short sale is outstanding, the short seller will have the use, of, or interest on, the proceeds of the sale. This is the assumption of:

Question42: The practical effect/s of Special Valuation Rules is/ are:

Question43: The use of asset-based approach should not be confused with the selection of the appropriate premise of value for the subject business valuation. Some analysts mistakenly confuse the use of asset-based approach with a liquidation premise of value (or with a liquidation valuation). Rather, the asset-based approach can be used with all premises of value including:

Question44: The analyst should compare the backlog on the valuation date with that on previous dates. Such comparison, especially with the backlog one year prior to the valuation date, is one of:

Question45: The most typical procedure/s in capitalized earning method is/are all EXCEPT

Question46: There is no universally accepted conclusion as to what accounts should be "netted out" in the estimation of net tangible asset value. For example, various analysts have interpreted net tangible assets to mean any one of the following EXCEPT:

Question47: Most companies carry accounts receivable and deduct some allowance for potentially uncollectible accounts. The typical policy is to ________ the allowance for doubtful accounts at the end of each month by a percentage of that month's _______.

Question48: Most of the mechanisms for setting prices in buy-sell agreements generally fall into one or a combination of following categories EXCEPT:

Question49: There is a general consensus among appraisers that there is little or no difference in controlling interest market values between S corporations and C corporations under most circumstances, and that any difference depends on:

Question50: There is no set of number guideline companies to use. However, the more data there are about each company and the greater the similarity between the subject company and the companies chosen as guideline companies, the ______ guideline companies will pass muster.

Question51: Documentable, arm's-length, bona fide offers to buy or sell may also be useful evidence of value. Funded bona fide offers (i.e. offers for which the financing for the offer is already in place) should be gives more weight and more consideration than:

Question52: The sales comparison approach is based on the economic principles of:

Question53: The obvious disadvantage of the formal appraisal with regular update is:

Question54: The special characteristics of the preferred stock that we typically encounter include all of the following EXCEPT:

Question55: When specifying, who is to provide the valuation services, the important distinction is whether the client is retaining the appraisal firm itself or the individual appraiser employed by the firm. The common practice is:

Question56: A single rule of thumb that, for example, a satisfactory ratio is 2.0:1 is not widely followed in determining the current ratio, because of vastly different conditions typical in various industries, such as accounts receivable and collection periods and inventory turnover periods. As with most ratios, the adequacy of the current ratios for the given company can be better gauged by:

Question57: 1. Dissenting stockholder actions. 2. Minority oppression actions. Either may be accompanied by claims of breach of fiduciary duty. These are the actions brought by:

Question58: In most business valuations, the opinion of value will be based at least partly on other, similar transactions, such as:

Question59: The work-in-process inventory of a professional service firm is essentially the unbilled receivables of the firm. Therefore, the same net realizable value rules discussed with respect to accounts and notes receivable would apply to this asset as well. With regard to tangible merchandise inventory, there are some common valuation methods such as:

Question60: Factors affecting the value of preferred stock are all of the following EXCEPT:

Question61: Proprietary technology is also counted in intangibles such as, a trained and assembled workforce, special know-how, customer relationships, supplier relationships, or other intangible assets that make the company available competitors and give it earning power. Some closely held business owners call these intangibles:

Question62: Regulated companies usually are regulated because they have a captive market and are in a monopoly position to supply a needed service; thus, their cost of capital should be considerably________ that that for an average company

Question63: Which of the following is NOT out of standard categories of assets for the purposes of applying the asset accumulation method?

Question64: The second step in capitalized excess earnings method is:

Question65: The Black-Scholes model assumes near perfect markets for both the options and the underlying stock.
Among other conditions, the model assumes the following EXCEPT:

Question66: Since the use of the extraordinary designation is so restrictive, obviously many items do not meet the strict definition for accounting purposes but nevertheless should be regarded as nonrecurring for analytical purposes. Some examples of such items would be all of the following EXCEPT:

Question67: ____________ is perhaps the most difficult task for the business appraiser.

Question68: Some judicial circuits use a multifactor test to determine whether compensation is reasonable or excessive. For example, the Ninth Circuit has used a five-factor test. Which of the following is out of those factors?

Question69: Family law courts generally recognize three basic approaches to value. Which of the following is NOT out of those approaches?

Question70: The purpose/s of requesting financial information, in the valuation process, regarding equipment lists, aged receivables, aged payables and prepaid expenses is/are:

Question71: Which one of the following is/are example/s of normalizing adjustments?

Question72: The primary ownership interest characteristics that need to be addressed in almost every business valuation are the following EXCEPT:

Question73: The advantages of the binomial model over the Black-Scholes model and its variations include:

Question74: Estate taxes become a problem only to the extent that:

Question75: The analyst should try to gain an understanding of how the company perceives the industry and the particular aspect within which it operates. Which one of the following is NOT out of such aspects?

Question76: A control owner or potential owner might make control adjustments, but a minority owner, generally, could not force the same changes. Therefore, control adjustments normally would be made only in the case a controlling interest valuation, unless there was reason to believe that the changes were imminent and probable. These include all of the following EXCEPT:

Question77: The rate of interest that, when applied to the expected future payments equal to the debt security's observed market price is called the:

Question78: Which of the following assumption is a base for the process of unlevering and relevering betas to an assumed capital structure?

Question79: If Paola Pizza Parlors stock started the year at $10 per share, paid $0.50 in cash dividends during the year, and ended the year at $11.50 per share, then the total investment yield or rate of return for the year would be:

Question80: The same general processes and decision criteria apply to both (1) deciding on whether or not to rely on any particular valuation multiple at all and (2) deciding on the relative weight to be accorded each valuation multiple ultimately used in reaching the opinion of value. A study of the transactional data may lead to greater of lesser reliance on certain valuation multiples than one might have expected prior to compiling the data a. All of the following are considered in impact of guideline transactional data evaluation EXCEPT:

Question81: Bishop and Schroeder make the point that lack of marketability discounts should be recognized, just as they are in Tax Court, because one spouse usually gets liquid assets while the other spouse lacks:

Question82: Below is a partial listing of possible scenarios in_________________.
-100 % control
-More than a majority or supermajority, but less than 100%
-More than 50% but less than a supermajority, where state statutes or articles of incorporation require a supermajority
-50 %
-Less than 50 % but "effective control"
-Minority shares that control by voting block

Question83: Which of the following factors is NOT considered, among others, when determining if quantitative adjustments to the sales comparison data are necessary?

Question84: The remainder interest is valued:

Question85: To get an explanation or interpretation of something on the financial statements, or to consult working papers for details that augment the financial statements, it may be necessary to interview the company's outside independent accountant. This is most often the case when:

Question86: Which of the following are categories in which projections are usually necessary?

Question87: Analysts should consider each of the following measure when estimating the remaining useful life of intangible asset EXCEPT:

Question88: When asking for historical financial statements on the subject property, one should endeavor to study statements during a __________________. The most commonly used period is five years, but this should not be used as a rote number of years.

Question89: It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the market value should be considered. The following factors, although not all-inclusive are fundamental and require careful analysis in each case EXCEPT:

Question90: The primary impact on the value of a sinking fund preferred stock results from the fact that redemption creates a finite stream of income to the investor plus________________.

Question91: Various transactional and taxation events may occur that change the taxpayer's original basis in the property. These events usually ___________the original basis.

Question92: It is important to point out that _______________of the business can have an impact on the valuation conclusions, especially when it comes to partnership and limited liability companies.

Question93: S corporations, limited liability corporations, limited liability partnerships, family limited partnerships, professional corporations, real estate investment trust, investment companies registered under the investment company act of 1940 and personal holding companies are the examples of:

Question94: If a $1000 per share value of convertible bond is issued for $1000, and is convertible into 20 shares of issuer's common stock that pays no dividend, there will be no economic benefit in converting the debt to stock as long as the common stock is selling for less than $50 per share. If the bond value is indeed in the equity-equivalent region, as the value of a single share of common stock increases $1, the bond value will increase:

Question95: The assumptions underlying the capital asset pricing model are as follows:

Question96: The normalized economic income is capitalized, typically, as an annuity in perpetuity. The capitalization rate used in this procedure should be:

Question97: The valuation opinion repot will typically include the following sections EXCEPT:

Question98: The determination of which asset-based method to use in a given valuation engagement should be a function of all of the following EXCEPT:

Question99: The capital stock of a corporation, its net assets and its share of stock are entirely different things... the value of one bears no fixed or necessary relation to the value of the other; because:

Question100: The market approach, income approach, and asset approach, or a combination of these, are all used to value marital property, but the courts seem to be leery of:

Question101: _____________________ is the uncertainty of future returns resulting from the sensitivity of the return on the subject investment to movements in the return on the investment market as a whole.

Question102: The basic valuation model, which is central to the income approach to valuation, has only two variables.
Which of the following is/are NOT out of those variables?

Question103: Most analysts agree that one of the most important factors in the estimation of the direct capitalization rate for the excess earnings is the perceived persistence of the excess earnings. The longer the time period and the greater the uncertainty of the expectation of excess earnings, the _________the direct capitalization rate.

Question104: Virtually, all businesses or interests in businesses may be appraised under some alternatives premises of value. Which of the following is not out of those premises?

Question105: Depletion is relatively easy to define; it is very difficult to measure. Because of:

Question106: Some companies' articles of incorporation have provisions that if majority shares are sold in a change of control transactions, the majority shareholders must be offered the same price. This relates to:

Question107: "The amount at which property would change hands between a willing seller and a willing buyer, when neither is acting under compulsion and when both have reasonable knowledge of the relevant facts". This definition is related to:

Question108: An interesting form of debt security, known as _________________, allows the issuer to avoid paying cash to the debt holder for interest prior to the debt's maturity. The only cash payment from the debt issuer comes at maturity, when the debt's face value is repaid to security holder.

Question109: A major issue in many fair value cases is:

Question110: Which of the following factor/s is/are most important for the redemption provisions that affect their value?

Question111: _____________________ applies option pricing methods to value economic projects, companies, and financial securities. Just as option pricing models incorporate the flexibility of option holders' decision as to whether and when to exercise an option by paying the exercise price.

Question112: _____________ proclaims that if valuing a company by the asset approach, the analyst should check to see whether capital gains taxes would be incurred on the liquidation of the assets. If so, it is possible that a discount should be taken for the capital gains tax liability.

Question113: All of the various tangible personal property valuation method and procedures can be grouped into the following approaches EXCEPT:

Question114: The direction and magnitude of the company-specific risk premium may be based on an analysis of some factors. Which of the following is/are out of such factors?

Question115: A valuation of the assets can even be important in ___________ in which a weighted average cost of capital method is used if the analyst uses the asset base as a determinant of the amount of debt that the company can support.

Question116: The most common interpretation of net tangible asset value is:

Question117: If a $1000 per share value of convertible bond is issued for $1000, and is convertible into 20 shares of issuer's common stock that pays no dividend, there will be no economic benefit in converting the debt to stock as long as the common stock is selling for:

Question118: It is the collective revaluation of all of the company's assets and liabilities. This analysis is usually conducted through the application of the capitalized excess earning method. This is a general method in:

Question119: In comparing companies with very different accounting practices, one way for an analyst to adjust for intangible items on the financial statements is to eliminate:

Question120: "In computing the book value per share of stock, assets of the investment type should be revalued on the basis of their market price and the book value adjusted accordingly." This statement explains:

Question121: Normally, the business will realize the economic benefit of the prepaid expenses within the normal course of one business cycle. Therefore, normally:

Question122: Under the asset approach, the value of the corporation's investment in common stock is the common stock's fair market value on the valuation date:

Question123: Buy-sell agreement may specify that the shares be valued strictly at their fair market value as:

Question124: A unique feature of Merger stat/Shannon Pratt's control premium study is a transaction code by type of transaction. i.e.:

Question125: Which of the following ratios demonstrate the company's ability to meet its current obligations? These can help resolve one of the common controversies in business valuation: whether the company has any assets in excess of those required for its operating needs or, conversely, whether its assets fall short of its needs.

Question126: Valuation analysts prefer to work with audited financial statements because of their completeness and reliability. There are various levels of scrutiny represented by audited, reviewed, and compiled financial statements. The same might have:

Question127: The analyst used __________ to quantify the value of intangible assets. The analyst estimated the current cost required for the company to recreate its current level of customer awareness, brand recognition and consumer loyalty.

Question128: Life insurance can serve as an important source of funding for stock purchase agreements pertaining to decreased shareholders. The advantages of using life insurance for the purpose are several. Which of the following is NOT out of such advantage?

Question129: The analyst should keep in mind that (1) if earnings are adjusted from LIFO to FIFO and (2) if after-tax income or after-tax cash flow are used as the appropriate measure of economic income, then the adjustment should be net of:

Question130: The marital estate comes into being upon filing for divorce. It represents the assets that must be divided according to the property laws of the state. Currently, each state adheres to either (1) ________________ or (2) _____________________.

Question131: According to the American institute of Certified Public Accountants (AICPA), the term financial statement refers to:

Question132: "Tag along rights" are Buy-Sell agreements which:

Question133: With respect to the contents, _____________ must include:
1. The date of the appraisal
2. The date of the transfer
3. The purpose of the appraisal
4. The description of the property
5. A description of the assumption utilized
6. A description of the appraisal process employed, including the valuation method utilized
7. A description of any hypothetical conditions considered etc.

Question134: Which of the following is the primary disadvantage of the asset accumulation method?

Question135: Based on the purpose and objective of the valuation, the analyst will apply the appropriate standard of value to the subject equity interest. The standard of value for the individual assets and liabilities may be different from the standard of value for the subject equity interest. For example:

Question136: As with many matters related to marital dissolution valuations, the consideration of goodwill varies among states. In general, the various judicial precedents follow one of three positions regarding the consideration of goodwill. Which of the following is/are out of those options?

Question137: One way is to compare the historical percentage of bad debt losses from past credit sales with the percentage current credit sales being charged to bad debt expense to see if too little or too much is currently being charged. Another approach is:

Question138: The business's capital requirements play a part in the valuation because they are an integral part of estimating net cash flow and dividend-paying capacity. Capital requirements include such items EXCEPT:

Question139: The definition of specific business interest can be broken down into two broad questions:
1)-Is the valuation to be a valuation of assets or a valuation of securities?
2)-In either case, exactly what assets or what securities are subject to valuation? By securities in above context, we mean:

Question140: ____________________ is common stock received when the option is exercised.

Question141: A common first step in ratio analysis of financial statements is to prepare what are sometimes called
____________________. On these statements, each line item is expressed as a percentage of the total.
For example, on the balance sheet, each line is shown as a percentage of total assets.

Question142: ____________ is a specialized classification of intangible and its categories are creative (e.g. copyrights) and innovative (e.g. patents).

Question143: The discount rate is a market-driven rate. It represents the expected yield rate-or rate of return-necessary to induce:

Question144: No deduction is allowed for any charitable contribution of ________ or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledge from the donee organization of the contribution.

Question145: Qualitative factors might also cause the required yield to be higher or lower than that based solely on the quantitative ratio analysis. Whish of the following is NOT out of such quantitative factors?

Question146: If the funding of the forgoing requirements has been provided for through life insurance taken out in prior years that insurance should be reviewed as to both amount and type. The necessary amounts of insurance can change for several reasons. All of the following are those reasons EXCEPT:

Question147: The advantages of having a formal, independent outside appraisal, kept current with periodic updates are many. From a business planning perspective, the typical strong (management/ownership relationship) in a closely held business often requires a valuation study in order to support:

Question148: The accountant express limited assurance in _____________ that there are no material modifications that should be made to the statements in order for them to be in conformity with generally accepted accounting principles.

Question149: Which one of the following is perhaps the most valuable source of authoritative information on a particular industry?

Question150: The cost approach provides a systematic framework for estimating the value of an intangible asset based on the economic principle of:

Question151: ___________ may apply to publicly traded stock where the size of the block is large enough relative to normal trading volume that it could not be sold in a short time without depressing the market price.

Question152: The capital asset pricing model is part of a larger body of economic theory known as capital market theory.
Capital market theory also includes:

Question153: The most appropriate application of the excess earnings method is for the purpose of:

Question154: In many instances, value considerations are tempered by internal variables, often variables relative to specific shareholding as opposed to the company as a whole. Which of the following is NOT out of such variables?

Question155: Financial risk is measured in the following ways EXCEPT:

Question156: Fisher Black developed a technique to value American stock options using the Black- Scholes model called the pseudo-American call option model. The steps in the method are as follows EXCEPT:

Question157: 1
1- _____________
1+ premium
This is a formula for:

Question158: Which of the following agreements often restrict the marketability of the subject interests and they can, correspondingly, affect the value of other classes of equity as well?

Question159: Imagine that an investor in the common stock of a company has two choices, either to (1) but 100 shares of a company's common stock at $10 per share or (2) to purchase a call for $125 to purchase
100 shares at the same $10 price at the end of nine months. If the investor chooses to buy the stock, the investor must pay $1,000 immediately and is at risk for the entire $1,000 investment. If the investor chooses to purchase the call option, the investor will pay only $125 immediately and can wait until the option's expiration date to decide whether or not to buy the stock for an additional $1,000. The investor's risk is limited to $125. If the option is ____________________, the option will be exercised. If it is
____________________, the option will simply lapse.

Question160: Unfortunately, the term enterprise value is used, at best, very ambiguously and, at worst, very carelessly. It means different things to different people, each of whom many believe that his or her definition is the right definition. It is generally used to represent some sort of ________of the company and is often used as a synonym for_______.

Question161: "Fair value" means the value of the corporation's shares determined:

Question162: _________ is the value to some particular owner or potential owner, is found often in the context of mergers and acquisitions and in family law disputes.

Question163: The coverage of fixed charges is a more inclusive ratio than the times-interest-earned ratio in that:

Question164: There is an additional ____________ valuation rule, which requires that the appraiser determine whether any of the extraordinary payment rights, if exercised in conjunction with any qualified distribution rights, would lower the total value of the preferred security.

Question165: There's a tendency for the market for the businesses to change more rapidly than the market for real estate. After all, a business can be thought of as a collection of _____________ each with its own price volatility and risks of ownership.

Question166: "When earnings have once been "realized", so that they can be expressed with some approach to accuracy in the company's accounts, they are already water under the mill and have no direct bearing on what the property in question is now worth. Value, under any plausible theory of capitalized earning power is necessarily forward looking. It is an expression of the advantage that an owner of the property may expect to secure from the ownership in the future. The past earnings are therefore beside the point, save as a possible index of future earnings". This statement correctly expresses:

Question167: There are many subtitles to the application of fair value for cooperate law purposes. For example, some states consider concepts of "entire fairness." There are following aspects of entire fairness EXCEPT:

Question168: Marital dissolution cases in jurisdiction where personal rather than a marital asset and therefore needs to be separately valued from the rest of the business enterprise. This example is an application of:

Question169: _____________________ list can yield insight into the company's profitability, liquidity and even viability.
However, many relatively small companies do not prepare them.

Question170: 1. Direct capitalization
2. Yield capitalization
These above are the two categories of valuation methods under:

Question171: If there are five directors to be elected, and 500 shares are outstanding and voting for the election of directors, the minimum number of shares necessary to elect one director would be 84 shares. Proof: 84 shares time five directors to be elected equals 420 votes, all cast for one director. Assuming the rest of the stock (416 shares) votes in bloc as the majority, such total of 2,080 votes distributed among five directors would be 416 votes each. Therefore, an individual representing the minority and receiving its 420votes is sure to get one of the places on the board, the majority getting the other four places. The minority in this example must be sure to vote all of its 420 votes for one director; if it distributed the 420 votes among two, it obviously would not win any places on the board. Cumulative voting, move over, requires a majority of the stock to be able to elect a majority of the board. In the above example, five directors, ______________ shares are necessary, or a majority of the _____________ shares total.

Question172: The court's acceptance, rejection, or relative weight accorded to various valuation approaches and methods generally revolves around some factors. Which of the following are NOT out of those factors?

Question173: Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller when:

Question174: One of the most important tools for conducting a business valuation thoroughly and on a timely basis is a proper schedule. Most first-time, or in frequent, business valuation clients (and their attorneys) tend to underestimate the amount of lead time necessary for the appraiser to prepare a through and professional opinion. Scheduling problems often arise because:

Question175: Continuing the above example, if earnings were $30,000, earning per share would be:

Question176: An intangible's deficiencies are considered curable when the prospective economic benefit of enhancing or modifying it exceeds the current cost (in terms of material, labor, and time) to change it. An intangible's deficiencies are considered incurable when:

Question177: Which of the following is/are NOT out of components of the discount rate?

Question178: If the language of the relevant agreements indicates that minority block of stock will be valued on a controlling ownership interest level of value, a full lack of control discount will not apply to the transactions to which the provision is applicable. For example:

Question179: The United State is by far the world leader in markets for both publicly traded securities and closely held businesses and business interests. Two factors have combined to accelerate the spread of U.S technology in financial appraisals and market throughout the world. Which of the following is/are of those factors?

Question180: 1. Dividends or partnership withdrawals (i.e. current economic income). 2. Proceeds from the ultimate sale of the ownership interest or liquidation of the subject business (i.e., including any long-term appreciation in the value of the security interest itself). These two are the categories of:

Question181: "Market value is the most probable price which a property should bring in a completive and open market under all conditions requisite to fair sale the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus." Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions/s whereby:

Question182: Impairment is the difference in value between the carrying amount of goodwill and the actual fair value of the goodwill. However, for federal income tax reporting purposes:

Question183: _________________ are excellent sources of statistical, analysis and projections of regional, national and international economic and financial conditions.

Question184: The advantages of searching online valuation information include all of the following EXCEPT:

Question185: There are some allowable methods for determining the basis of property received in exchange for other property. Which of the following is/are out those methods?

Question186: Situations commonly requiring the valuation of option are all of the following EXCEPT:

Question187: The analyst should be curious about the proprietary products and services, especially:

Question188: The general purpose of __________________ is to aid in making some quantifiable assessments of the long-term solvency of the business and its ability to deal with financial problems and opportunities as they arise.

Question189: Buy-sell agreement in which issuing corporation or partnership buys the interest from the transferring party or from the deceased party is called:

Question190: When it comes to related party transactions, it is important that the analyst gather:

Question191: It is highly unlikely, in formula approaches for setting the price in a buy-sell agreement, that the price established by a formula at the time of signing will be even close to the value of the interest at the time of triggering event, which could be many years later. For these reason analysts:

Question192: 1. Pratt's stats
2. Done deal
3. Bizcomps
4. IBA market database
These are the four databases devoted to:

Question193: A series of small stock premium studies have been developed by Roger Grabowski and David King. They use eight different measures of size for two major groups (Equity size and Company size). Which of the following is/are measure/s of company size?

Question194: Many cost items fall into a "___________", in which the decision to expense or to capitalize the expenditures is subjective. One such decision is the dividing line between maintenance expenditures, which are expenses and capital improvements, which are capitalized.

Question195: Let's say that a company had 100,000 shares outstanding at the beginning of the year and issued 30,000 more shares on May 1. The 100,000 shares would be outstanding for four months and the 130,000 shares for eight months, or two-thirds of the year. The weighted average number of shares outstanding for the year would be:

Question196: One way or the other, the financial benefits of ownership of an interest in a business enterprise must come from the following sources EXCEPT:

Question197: Control transaction valuation multiples (often called deal multiples or acquisition multiples or acquisition multiples) often use the following measures of returns in the denominator EXCEPT:

Question198: (1) Partly because of its fairly wide dissemination (2) Partly because of its apparent simplistic nature,
_______________ valuation method is widely adopted in one form or another for other valuation purposes, such as material dissolution.

Question199: The income capitalization approach is based on the economic principles of:

Question200: About half the state and many individual companies have statutes or articles that require a super majority to effect certain corporate actions. If the minority block is of sufficient size to block such actions, there may be cause to reduce the discount for lack of control. In most cases, this would not be grounds for a slight reduction in the discount. Which of the following term is related to this scenario?

Question201: An item that frequently causes controversy in a business valuation is the value of a:

Question202: As with any secondary sources, errors and inconsistencies occur, so the original source documents are the only guarantees of absolute accuracy as a source of merger and acquisition data. Which one of the following is NOT out of those original source documents?

Question203: In setting the interest rate in Buy-Sell agreement, we face the problem that market interest rates fluctuate considerably over time, and we have no way of knowing at what time in the future the Buy-Sell transaction will be triggered nor what the market level of interest rates will be at that time. There are several possible approaches to dealing with this dilemma. One approach is

Question204: Automatic reliance on industry rates such as the return on total assets, tangible net worth or equity. This is the procedure which should NOT be used in the estimation of the:

Question205: When using the elements of both the asset accumulation method and the capitalized earnings method in the same valuation, the analyst should pay particular attention to the selection of:

Question206: FLPs (Family limited partnership) may help an owner maintain:

Question207: Due to these complexities, for practical purposes it is acceptable to use the ratio as we defined it.
However, the analyst is well advised to research:

Question208: The most frequently encountered reasons for needing to value debt securities are the following EXCEPT:

Question209: There are some factors that determine whether the buy-sell agreement is conclusively binding for estate tax purposes. Which of the following is/are out of those factors?

Question210: Market evidence indicated that adjustable-rate preferred stocks generally required yields in the range of
______________ basic points.

Question211: Recapitalizations involving debt securities may be undertaken for a variety of reasons. One common reason is:

Question212: If the seller is in a low tax bracket and the buyer in a high one, it may be advantageous to:

Question213: In the direct capitalization economic income method, the value of the company is estimated by dividing the expected economic income of company by an appropriate:

Question214: The first step in the valuation process, after carefully defining the assignment, is to gather the data necessary to conduct the assignment. These data can be categorized into three groups. Which one of the following is NOT out of those groups?

Question215: A general category of taxable events relates to the amount of recognition of income (if any) associated with economic benefits received by a business. Examples of this category of taxable events include all of the following EXCEPT:

Question216: The application of any discounts should always be taken in the context of:

Question217: In a marital dissolution the parties may be concerned with the change in value that occurred during the marriage. In estate cases, the trustee, the executer, or personal representative will consider adopting the
"alternative valuation date" (i.e. six months after the date of death) to determine which is more advantageous. These are the examples of:

Question218: Asset accumulation method can quickly quantify the effects on business value of many common seller structural considerations, such as:

Question219: The purpose of Erickson and Wang study was to empirically quantify the increase in selling price realized by sellers of entire companies in cases where:

Question220: When the valuation subject is a controlling ownership interest in the company, the existing total compensation less _________________compensation may be considered excess compensation.

Question221: Calculating the volatility of the underlying stock is more complicated. Volatility is the standard deviation is the price of underlying stock. The volatility used in the Black Scholes model is the total volatility of the underlying stock's price. It is not its bets, which measures

Question222: One unique aspect of the valuation provision in a Bu-Sell agreement, as opposed to other valuation problems, is the extreme uncertainty concerning when a future event that triggers a transaction under the agreement will occur. This is one of the key reasons why:

Question223: In merger market valuation models:

Question224: Three levels are identified by ____________ in the hierarchy of measurements to identify fair value, with the highest level available to be used. These levels are; highest-priority level, inputs are those other than quoted prices included within level 1 that are directly or indirectly observable and Level 3 where inputs are unobservable.

Question225: The fundamental of CAPM is:

Question226: ______________ is defined as the sum of cash and cash equivalents plus receivables (usually all current assets listed above inventory) divided by current liabilities. For most companies, the only other significant current asset is inventory usually the slowest of the current assets is to be converted to cash.

Question227: Most typically, a company, or some or all of its stock, is to be sold and a debt security received as all or part of the consideration. The seller needs to know the cash-equivalent value of the consideration being received in return for the company or stock being given up. It is uncommon for notes or other debt securities issued in connection with the acquisition of a company to have a cash equivalent value of
___________________ the securities value.

Question228: Which of the following attribute should be there for an intangible asset to exist from an economic perspective?

Question229: This is sometimes considered the accumulation of all other elements of economic value of business enterprise not specifically with (or allocated to) individual tangible and intangible assts. Its analysis and qualification is an important component in the application of asset accumulation method to a company like Seller. What is this?

Question230: Options can be very complicated. For example, some options have strike pries that vary over time or under different market conditions. Other options have lives that vary depending on stock prices and market conditions. There are even _________________, which are options on option, and ______________, which set price boundaries.

Question231: In general, the use of life insurance can fulfill all of the following basic needs EXCEPT:

Question232: The value of an asset is the present value of its expected returns. Specifically, you expect an asset to provide a stream of returns during the period of time you own it. To convert this estimated stream of returns to a value for the security, you must discount this stream at your required rate of return. This process requires estimates of (1) the stream of expected returns and (2) the required rate of return on the investment. Value today always equals future cash flow discounted at the opportunity cost of capital. This is actually:

Question233: Statutory law
Case law
Administrative rulings
Company documents
Contracts between parties' precedent established by prior transactions Legal documents. These are some of the most important sources of guidance as to:

Question234: ____________________ are defined as the sum of the market value of total liabilities divide by the aggregate liquidation value of the preferred stock.

Question235: Stockholders' privilege to subscribe to new issues of voting stock, usually the common stock or securities convertible into voting stock, usually the common stock or securities convertible into voting stock, before such offerings are made to nonstockholders. This is called:

Question236: In ________cases, the valuation date itself is an issue to be resolved by the court. In such situations, the appraiser must be prepared to address the valuation as of several dates, sometimes without knowing which date the court determined to be relevant until after the judgment is rendered. Since the choice of valuation date in such cases is a legal matter.

Question237: Discounts for contingent liabilities can cover a wide range of spectrum, such as:

Question238: Supermajority vote requirements and state dissolution statues are the factors that influence:

Question239: For example, in data collection process for conducting the respective valuation, supporting analysts may be collecting industry, economic, rate or return, and guideline transaction information at the same time that the case manager is working directly with the management of the subject company. In any case, it is important to convey a sufficient overview of the company and of the assignment to all the valuation team members at an early meeting so that all of the analysts will be in a position to recognize important data as they proceed on the project... This example gives the idea that:

Question240: Valuation reports should contain a set of limiting conditions, and one of the typical limiting conditions is as follows:

Question241: The most common forms of redemption provisions found in privately held companies are as follows. Which of the following is NOT out of the common forms of redemption provisions?

Question242: In creating employee stock options, the issuing company usually endeavors to set the option's strike price at the fair market value of the underlying shares. When the strike price is set at the fair market value, the intrinsic value is ________, and the only value of the option is its __________.

Question243: ____________ is the flip side of discounts, which can be added for a variety of factors, such as control, industry risk, or a swing vote.

Question244: If the interest rate on a term contract is below the market interest rate for similar instruments at the time of event that triggers the transaction, the cash equivalent value the seller receives will be ___________ the contract's face value.

Question245: The instances and factors contributing to in adequate valuations for tax purposes by both taxpayer and IRS experts could easily fill an entire book of this size. Some of the most common inadequacies are the following EXCEPT:

Question246: Beta is a factor used to measure:

Question247: The most prevalent measure for assessing the likelihood of receiving future preferred dividends is the company's_________________, commonly defined as the sum of pretax income plus interest expense divided by the sum of interest expense plus preferred dividends adjusted for tax.

Question248: The Build-Up model divides the risk premium into its subcomponents and estimates the cost of capital as the sum of the following:
1.A risk-free
2.A risk premium, including one or all of following subcomponents EXCEPT:

Question249: Capital expenditures are a specific component in the discounted or capitalized net cash flow methods.
When using a market comparison approach to valuation, capital expenditure requirements may influence:

Question250: Appraisers or real estate, equipment, or other physical property informally asserts that their appraisals are accurate to within ________________.

Question251: An analysis of fixed and variable expenses will help the analyst understand: