Accredited in Business Valuation (ABV) (ABV) Free Practice Test

Question 1

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

A. Premiums

B. Contingent liability discounts

C. Combined discounts

D. Blockage discounts

Correct Answer: A

Question 2

The Encyclopedia of Banking & Finance offers the following formula for determining how many shares are required to elect one or more directors with cumulative voting:

A. [(Total number of shares voting * 3Number of directors desired) / (Total number of managers 1)] + 1

B. [(Total number of shares voting * 3Number of directors desired) / (Total number of directors 1)] + 2

C. [(Total number of shares voting * 3Number of directors desired) / (Total number of directors 1)] + 1

D. [(Total number of shares voting * 3Number of managers desired) / (Total number of managers 1)] - 1

Correct Answer: C

Question 3

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?

A. The retained security must be a class senior to the transferred junior security

B. The
subject securities (both
the
retained senior preferred
and
transferred
junior securities) must be non-publicly traded

C. The transfer is a proportionate transfer of all senior and junior equity interests and, as mentioned the transferor must retain a senior equity interest.

D. The transaction must result in a transfer (directly or indirectly) between members of the family

Correct Answer: C

Question 4

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

A. When the option value is at issue in a damage suit, such as a breach of contract suit between an existing or former executive and the issuing company

B. When the option is designed, granted exchanged, or terminated

C. When financial statement disclosure requires that the option value is recognized

D. When the option is a repurchased option by the OTC market

Correct Answer: D

Question 5

Which of the following is NOT the method of computing depreciation charges all acceptable to the IRS for income tax purposes?

A. sum of-the Months'-digits

B. straight-line

C. declining-balance

D. accelerated cost recovery systems

Correct Answer: A

Question 6

Which method was originally created for the purpose of valuing the intangible value of a business, not for the purpose of valuing the company as a whole?

A. Revenue Ruling Method

B. Excess earnings Method

C. Normalized economic earnings Method

D. Capitalized Earning Method

Correct Answer: B

Question 7

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?

A. What are the nature and rate of technological changes affecting the industry?

B. What special industry factors have a bearing on this particular company?

C. How does it try to do the best job of fitting in its niche?

D. What is the progress and prognosis for new products or services, locations, channels of distribution, etc?

Correct Answer: C

Question 8

The extent to which the valuation multiples are tightly clustered or widely dispersed tends to indicate the extent to which the market focuses on that particular valuation multiple in pricing companies in the particular industry is known as:

A. None of the above

B. Market Acquisition Model

C. Apparent Market Reliance

D. Liquidity Ratio Analysis

Correct Answer: C

Question 9

Fair value is:

A. Quoted price

B. That would be given to purchase an asset or paid to transfer a liability in an orderly transaction between market participation at the measurement date

C. A price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participation at the measurement date.

D. Market price on valuation date

Correct Answer: C,D

Question 10

Which of the following is the main category of adjustments to financial statement?

A. All of the above

B. put guideline and subject companies on a comparable accounting basis

C. Remove nonrecurring items (and any required tax effects) from income statements.

D. Adjust for non-operating items.

Correct Answer: A

Question 11

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

A. Valuation advisories

B. The type of gift

C. The value of gift

D. The fair market price of gift

Correct Answer: B

Question 12

Stockholders' privilege to subscribe to new issues of voting stock, usually the common stock or securities convertible into voting stock, before such offerings are made to non-stockholders this scheme is known as?

A. preemptive rights

B. blocking rights

C. Cumulative rights

D. anticipatory rights

Correct Answer: A

Question 13

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

A. Goodwill

B. Infringement of patents, copyrights or trademarks

C. Antitrust, lost business opportunity, breach of contract

D. Diversified businesses

Correct Answer: B,C

Question 14

Which study found that companies with stock listed on national exchanges had lower discounts on their restricted stock transactions than did companies with stock traded over- the-counter (OTC)?

A. Trout study

B. Moroney study

C. Gelman study

D. Maher study

Correct Answer: A

Question 15

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?

A. Financial reports

B. Buyouts, published every other week by securities data publishing

C. The merger yearbook

D. Mergerstat Review

Correct Answer: A

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IFPUG Accredited in Business Valuation (ABV) (ABV) Free Practice Test