NACVA NACVA Certifications CVA Questions & Answers

• Question 221:

  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:

  A. Revenues

  B. Operating income available to invested capital [earnings before interest and taxes (EBIT)]

  C. Intangible book value

  D. Discretionary earnings

  Correct Answer: C

• Question 222:

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

  A. The initial value derived from the guideline merged and acquired company method, before adjustment for factors such as size of subject block and degree of marketability, is an indication of transaction prices of major ownership interest, usually controlling ownership interests.

  B. When same acquisition target has different buyers both due to perception and reality

  C. At the time of achieving synergies

  D. In estimation of enterprise value

  Correct Answer: A

• Question 223:

  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:

  A. A share of common stock does not represent a share in the ownership of the assets of a business.

  B. Shareholders are only concerned with dividends

  C. Only the corporation itself holds to all its assets and liabilities ... A thirsty shareholder of brewery cannot walk into "his" company and demand that a case of beer be charged to his equity account

  D. Putting capital in stocks is somewhat a risky investment

  Correct Answer: AC

• Question 224:

  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:

  A. Value in use as a going-concern

  B. Value as orderly disposition

  C. Value as in exchange as part of a forced orderly liquidation

  D. A, B and C

  Correct Answer: D

• Question 225:

  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.

  A. Realized and unrealized earnings

  B. Short and long-term liabilities

  C. Tangible and intangible assets

  D. Unearned Revenues and fixed assets

  Correct Answer: C

• Question 226:

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

  A. Income approach

  B. Asset-based approach

  C. Guideline acquisition company approach

  D. Market-based approach

  Correct Answer: C

• Question 227:

  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:

  A. The economic benefits that the non-controlling ownership interest holder may realize.

  B. The financial benefits that the non-controlling ownership interest holder may realize.

  C. The economic benefits that the controlling ownership interest holder may realize.

  D. The financial benefits that the controlling stakeholder may realize.

  Correct Answer: A

• Question 228:

  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?

  A. Size of the subject interest (reflecting not only magnitude but control issues)

  B. The right to vote and to impact the direction of the business

  C. Restrictive provisions affecting ownership rights

  D. Legal proceedings related to ownership or management prerequisites.

  Correct Answer: D

• Question 229:

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

  A. Dividends, distributions, or other type of cash flowa) From operations, or From investments (e.g. interest)

  B. Liquidation or hypothecation of assets

  C. Loan/Debt

  D. Sale of interest

  Correct Answer: C

• Question 230:

  "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:

  A. Realized earnings

  B. Enterprise value

  C. Realized earning verses prospective earnings

  D. Prophesied gross and net earnings

  Correct Answer: C