Question 1

A business valuation is not usually essential when

Accepted Answer

A)  giving a gift of stock.
B)  going public.
C)  selling a business division.
D)  hiring a new director of operations.E) None of the above
F) A) and B)

Question 2

Return on investment

Accepted Answer

A)  is net profit divided by investment.
B)  provides a replacement value.
C)  establishes a value for the business.
D)  is equal to the current prime rate.E) None of the above
F) A) and D) A

Question 3

Which of the following hidden costs are involved when establishing the value of a firm?

Accepted Answer

A)  insufficient controls and costs
B)  divergent expenses
C)  personal expenses
D)  travel expensesE) C) and D)
F) A) and B)

Question 4

_____ refers to conducting a thorough analysis of every facet of an existing business.

Accepted Answer

A)  Due diligence
B)  Industry capitalization
C)  Knowledge acquisition
D)  Risk assessmentE) B) and C)
F) A) and B)

Question 5

The adjusted tangible book value includes all of the following except

Accepted Answer

A)  goodwill.
B)  patents.
C)  common price.
D)  deferred financing costs.E) None of the above
F) A) and B)

Question 6

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be to avoid

Accepted Answer

A)  start-up costs.
B)  earlier losses.
C)  previous profits.
D)  legal fees.E) All of the above
F) C) and D)

Question 7

_____ gives investors some protection against founders selling their interest to a third party.

Accepted Answer

A)  Right of first refusal
B)  A voting right
C)  A registration right
D)  A co-sale rightE) None of the above
F) All of the above

Question 8

When considering management, the entrepreneur should be concerned about

Accepted Answer

A)  ownership positions.
B)  pension and profit sharing.
C)  the total number of employees.
D)  employee benefits.E) A) and C)
F) B) and C)

Question 9

Avoiding start-up costs is a factor to consider when valuing a business.

Accepted Answer

A) True 
 B)False  True

Question 10

The primary advantage of the price/earnings approach to valuation is that it

Accepted Answer

A)  reflects "top value" of the firm.
B)  pays off assets and sells liabilities.
C)  assumes business begins operations.
D)  is simple to use.E) A) and B)
F) None of the above

Question 11

When considering physical facilities, the entrepreneur should be concerned about

Accepted Answer

A)  which facilities are owned versus leased.
B)  which facilities are used for production.
C)  whether adequate capital is maintained.
D)  facility upkeep.E) A) and B)
F) All of the above

Question 12

Increasing market share by acquiring a firm in the company's industry is one reason for the acquisition.

Accepted Answer

A) True 
 B)False

Question 13

Which of the followings venture valuation methods is the most effective if the business being valued needs to generate a return greater than investment?

Accepted Answer

A)  adjusted tangible assets
B)  price/earnings
C)  discounted future earnings
D)  replacement valueE) All of the above
F) A) and D)

Question 14

The price/earnings ratio is a method of valuation that is mostly used

Accepted Answer

A)  with publicly held corporations.
B)  when competition is high.
C)  for sensitive market conditions.
D)  for small corporations.E) A) and C)
F) A) and D)

Question 15

If cash flow is deemed to be the most important consideration in buying a business, which of the following valuation methods is likely to be used?

Accepted Answer

A)  adjusted tangible assets
B)  price/earnings
C)  high equity/low debt
D)  discounted future earningsE) None of the above
F) All of the above

Question 16

Vesting on founders' stock refers to holders of preferred stock having the right to purchase additional shares when issued by the company.

Accepted Answer

A) True 
 B)False  False

Question 17

Buyers and sellers assign different values to a business.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a reason for buyers to keep projections in perspective?

Accepted Answer

A)  vague histories
B)  fluctuating markets
C)  certain environments
D)  start-up costsE) A) and B)
F) None of the above

Question 19

Which of the following provides an absolute bottom line value of a firm?

Accepted Answer

A)  return on investment
B)  price/earnings ratio
C)  market value
D)  liquidation valueE) None of the above
F) All of the above

Question 20

Knowing a venture's pre-money valuation is not possible.

Accepted Answer

A) True 
 B)False

Exam 14: Valuation of Entrepreneurial Ventures

A business valuation is not usually essential when

Correct AnswerverifiedShow Answer

Return on investment

Correct AnswerverifiedA

Which of the following hidden costs are involved when establishing the value of a firm?

Correct AnswerverifiedShow Answer

_____ refers to conducting a thorough analysis of every facet of an existing business.

Correct AnswerverifiedShow Answer

The adjusted tangible book value includes all of the following except

Correct AnswerverifiedShow Answer

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be to avoid

Correct AnswerverifiedShow Answer

_____ gives investors some protection against founders selling their interest to a third party.

Correct AnswerverifiedShow Answer

When considering management, the entrepreneur should be concerned about

Correct AnswerverifiedShow Answer

Avoiding start-up costs is a factor to consider when valuing a business.

Correct AnswerverifiedTrue

The primary advantage of the price/earnings approach to valuation is that it

Correct AnswerverifiedShow Answer

When considering physical facilities, the entrepreneur should be concerned about

Correct AnswerverifiedShow Answer

Increasing market share by acquiring a firm in the company's industry is one reason for the acquisition.

Correct AnswerverifiedShow Answer

Which of the followings venture valuation methods is the most effective if the business being valued needs to generate a return greater than investment?

Correct AnswerverifiedShow Answer

The price/earnings ratio is a method of valuation that is mostly used

Correct AnswerverifiedShow Answer

If cash flow is deemed to be the most important consideration in buying a business, which of the following valuation methods is likely to be used?

Correct AnswerverifiedShow Answer

Vesting on founders' stock refers to holders of preferred stock having the right to purchase additional shares when issued by the company.

Correct AnswerverifiedFalse

Buyers and sellers assign different values to a business.

Correct AnswerverifiedShow Answer

Which of the following is a reason for buyers to keep projections in perspective?

Correct AnswerverifiedShow Answer

Which of the following provides an absolute bottom line value of a firm?

Correct AnswerverifiedShow Answer

Knowing a venture's pre-money valuation is not possible.

Correct AnswerverifiedShow Answer

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True

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