NACVA NACVA Certifications CVA Questions & Answers

• Question 91:

  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.

  A. Capital Structure

  B. Balance sheet leverage ratio

  C. Both A and B are same

  D. Liquidity ratios

  Correct Answer: C

• Question 92:

  Financial risk is measured in the following ways EXCEPT:

  A. Through calculating the degree of financial leverage

  B. Through calculating various leverage ratios

  C. Standard deviation of net income

  D. Calculating the level of company's fixed operating income

  Correct Answer: AB

• Question 93:

  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?

  A. The employee's role in the company

  B. Compensation paid to similarly situated employees in similar companies

  C. The character and condition of the company

  D. All of these

  Correct Answer: D

• Question 94:

  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:

  A. Economy's overall health

  B. Operating leverage

  C. Consumers' willingness to spend their disposable income

  D. GDP

  Correct Answer: AC

• Question 95:

  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:

  A. The greater the uncertainty of the income to the investor in the company

  B. The lesser the uncertainty of the equity to the investor in the company

  C. The greater the uncertainty of the equity to the investor in the company

  D. The lesser the uncertainty of the income to the investor in the company

  Correct Answer: A

• Question 96:

  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:

  A. That provides equity capital and receive a variable return but can participate in the company's growth through increased future returns

  B. That used to examine the uncertainty of income to the various suppliers

  C. That provides equity capital and receive a variable return but can participate in the preparation of financial statements

  D. That provides long-term debt and receive a variable return but can participate in the preparation of financial statements

  Correct Answer: B

• Question 97:

  ______________ 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.

  A. Current ratio

  B. Inventory turnover ratio

  C. Quick (Acid-Test) ratio

  D. Sales to Net Working Capital

  Correct Answer: C

• Question 98:

  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:

  A. Percentage of sales and total assets

  B. Comparison with industry norms than by comparison with any absolute standard

  C. Comparison with a market leader than by comparison with any absolute standard

  D. Comparison with a market leader than by comparison with industry norms

  Correct Answer: B

• Question 99:

  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.

  A. Liquidity ratios

  B. Activity ratios

  C. Leverage rations

  D. Income statement coverage ratios

  Correct Answer: A

• Question 100:

  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.

  A. Pre-analysis statements

  B. Common-size statements

  C. Short-term analysis

  D. Status diagnosis analysis

  Correct Answer: B