Name:

I. Multiple Choice
1. Which of the following is the primary objective of a firm?
a. employees' benefits d. prompt payment to creditors
b. satisfaction of customers e. maximize stockholder wealth
c. satisfaction of suppliers
2. Financial risk involves ___.
a. fluctuation in exchange rates c. balance of payments position
b. different interest and inflation rates d. All of the above
3. Managers are generally defined as ___.
a. Stockholders d. Suppliers
b. Agents e. Customers
c. Creditors
4. Refers to the nature and intensity of rivalry between market players in the industry.
a. Industry Rivalry c. Industry Competition
b. Industry Structure d. Industry Position
From number 5 to 21 shade letter (a) if true, (b) if false.
5. Value pertains to how much a particular object is worth to a particular set of eyes. T
6. Valuation includes the use forecasts to come up with reasonable estimate of value of an entity’s assets or its
equity. T
7. Intrinsic value refers to the value of any asset based on the assumption assuming there is hypothetically complete
understanding of its investment characteristics. T
8. Fundamentals refer to the characteristics of an entity related to its financial strength, profitability or risk appetite.
T
9. Merger is the general term which describes the transaction two companies have their assets combined to form a
wholly new entity. T
10. Corporate finance mainly involves managing the firm’s capital structure, including funding sources and strategies
that the business should pursue to maximize firm value. T
11. Uncertainty is captured in valuation models through cost of capital or discount rate. T
12. Generally, valuation process involves these five steps: understanding of the business, forecasting financial
performance, selecting right valuation model, preparing valuation model based on forecasts and applying
conclusions and providing recommendations. T
13. Value is impact by liquidity. T
14. Asset has been defined by the industry as transactions that would yield future economic benefits as a result of
past transactions. T
15. Brown field investments are easier to evaluate as information is already available from prior years. T
16. Book value method is a transparent approach since value can be easily verified by looking at the financial
statements. T
17. Replacement Value Method is superior to book value as it gives an indication of true value of the firm as of the
valuation date. T
18. Among the approaches, the book value method gives the most recent approximate of the company value. T
19. According to CFA institute, liquidation value refers to the value of a company if it were dissolved and its assets
sold individually. T
20. Liquidation value can be further computed on a per share basis by dividing total liquidation value by outstanding
ordinary shares. T
21. Assets are sold strategically over an orderly period to attract and generate the most money for the assets. This is
called forced liquidation. F
22. Refers to the barriers to entry to industry by new market players.
a. New entrants c. New entrance
b. Old entrants d. New trends
23. Popularized that a company creates a value if and only if the return on capital invested exceed the cost of
acquiring capital.
a. Alfred Mershell c. Alfredo Mars
b. Alfred Marshall d. Alredo Marshall
24. Tend to look for companies with good growth prospects that have poor management.
a. Chartists c. Acquisition
b. Information traders d. Activist Investors
25. General term which describes the transaction wherein two companies had their assets combined to form a wholly
new entity.
a. Divestiture c. Leveraged Buyout
b. Merger d. Spin-off
26. Demon Incorporated showed the following balances in its financial statements for 2024:
Current Assets 700,000
Non-Current Assets 1,200,000
Current Liabilities 500,000
Non-Current Liabilities 1,000,000
Outstanding shares 500,000
How much is the book value and book value per share of Demon incorporated for 2024?
a. 400,000; 12 b. 400,000; 0.8
 c. 500,000; 15 d. 500,000; 0
27. The following information was reported by Angel Company in their financial statements:
Current Assets 550,000
Non-Current Assets 950,000
Current Liabilities 300,000
Non-Current Liabilities 600,000
Outstanding shares 250,000
How much is the book value and book value per share of Angel Company?
a. 550,000; 2.5 c. 600,000; 2.4
b. 500,000; 2.4 d. 600,000; 2.5
28. Kang Bitna Company showed the following balances in its balance sheet as at year end:
Current Assets 2,500,000
Non-Current Assets 8,000,000
Current Liabilities 2,100,000
Non-Current Liabilities 1,000,000
Weighted Average of outstanding shares 1,500,000
According to the appraisal, 60% of the non-current assets can be replaced at 120% of their reported book value
while the remaining balance of the non-current assets has replacement value of 65%. Reported balance of other
items approximates their replacement value.

What is the total adjusted non- current assets reflected in the books of Kang Bitna company?
a. 7,840,000 c. 7,850,000
b. 7,800,000 d. 7,810,000
29. Referring to number 28 problem, how much is the replacement value of the non-current assets and current
assets of Kang Bitna company?
a. 10,300,000 c. 10,340,000
b. 10,310,000 d. 10,350,000
30. Referring to number 28 problem, how much is the replacement value per share of Kang Bitna Company?
a. 4.80 c. 4.82
b. 4.81 d. 4.83
31. The audited financial statements of Yours Co. for the calendar year ended December 31, 2021 showed the
following information:
Current Assets 550,000,000
Non-Current Assets 450,000,000
Current Liabilities 350,000,000
Non-Current Liabilities 250,000,000
Outstanding shares 2,500,000
Supposed that it was noted that the 80% of the total non-current assets are cheaper by 65% of the book value
reproduced while 20% of the total non-current assets are comprised of goodwill which upon testing was proven
to be valued correctly.
How much is the reproduction value?
a. 276,000,000 c. 274,000,000
b. 275,000,000 d. 277,000,000
32. Using the information from number 31, what is the reproduction value per share of Yours Co.?
a. 110 c. 109
b. 110.6 d. 109.6
33. REO Company's balance sheet revealed total assets of Php 5 million, total liabilities of Php 1 million, and 200,000
shares of outstanding shares. Upon checking with potential buyers, the assets of REO Company can be sold for
Php 3 million. Additional Php 500,000 will also be incurred to cover liquidation expenses. How much is the
liquidation value of REO Company per share?
a. 17.50 c. 7.50
b. 8.50 d. 10
34. The SGV Partnership is not going well, and the partners have decided to liquidate the business. The partners share
income and loss in a ratio of 2:1. SGV Partnership reported cash of Php 50,000 and building valued at Php800,000.
They owe Php 500,000 to various creditors. Upon checking with realtors, they can sell the building at Php 600,000
based on current prices. How much is the liquidation value of SGV Partnership?
a. 350,000 c. 850,000
b. 150,000 d. 650,000
35. One major factor linked to the value of business that reflects what is the long-term and strategic decision of the
company.
a. Current operations c. Embedded risks
b. Future prospects d. All of the above
36. What method is appropriate in valuing assets which do not have available external information even after
consulting with appraisers?
a. Book value method c. Reproduction value method
b. Replacement value method d. Liquidation value method
37. Sale of a major component or segment of a business (e.g. brand or product line) to another company).
a. Mergers c. Divestiture
b. Acquisition d. Spin-off
38. When valuing replacement costs of assets, valuators tend to consult with .
a. Actuaries c. Appraisers
b. Board of Directors d. Equity Analysts
39. The following methods shows the most recent value of the firm assets in the market as of the valuation date,
except
a. Replacement value method c. Reproduction value method
b. Liquidation value method d. Book value method
40. When computing for book value method, which of the following items should be deducted from the asset value?
a. Total liabilities c. Long-term debt only
b. Total shareholders equity d. Ordinary share capital
41. These are situation that most likely consider liquidation value, except .
a. Business Failures c. Corporate End of Life
b. Divestment d. Depletion of scarce resources
42. This is the situation where liquidation value is considered for industries which purpose are related to highly
regulated by the government which are normally limited like mining and oil.
a. Business failures c. Corporate end of life
b. Divestment d. Depletion of scarce resources
43. This is the situation where liquidation value is considered when insolvency happens which means when a
company cannot pay liabilities as they come due
a. Business failures c. Corporate end of life
b. Divestment d. Depletion of scarce resources
44. This is the situation where liquidation value is considered when the number of years the company can operate is
not extended particularly when the primary objective is reach like in cases of Partnership and Joint Ventures
a. Business failure c. Corporate end of life
b. Divestment d. Depletion of scarce resources
45. Receivables that are collectible after 60 days are classified as
a. Current Liabilities c. Current Assets
b. Non-Current Liabilities d. Non-current Assets
46. Acquisition of another business by using significant debt which uses the acquired business as collateral
a. Mergers c. Divestiture
b. Acquisition d. Leveraged buy-out
47. Value is determined under the going concern assumption
a. Going concern value c. Intrinsic Value
b. Liquidation value d. Fair market value
48. One major factor linked to the value of business that shows how is the operating performance of the firm in the
recent year.
a. Current operations c. Embedded risks
b. Future prospects d. All of the above
49. One major factor linked to the value of business that shows what are the business risks involved in running the
business.
a. Current operations c. Embedded risks
b. Future prospects d. All of the above
50. The following information was reported by Incognito Company in their financial statements:
Current Assets 798,000
Non-Current Assets 950,000
Current Liabilities 320,000
Non-Current Liabilities 600,000
Outstanding shares 250,000
How much is the net working capital of Incognito Company?
a. 350,000 c. 152,000
b. 280,000 d. 478,000
II. Problem Solving
Maris Company reported the following balances as of December 31, 2024:
Current assets P750,000
Non-current assets 1,400,000
Current liabilities 400,000
Non-current liabilities 500,000
Outstanding ordinary shares 1,000,000 shares
In 2025, analytics showed that current assets increased by 25%, non-current assets increased by 20% and current
liabilities by 10%. Half of the non-current liabilities were also paid. At the beginning of 2025, additional 250,000 shares
were issued by Maris Company.
Requirements:
a. How much is the book value of Maris Company as of December 31, 2024? 1,250,000
b. How much is the book value per share in 2024? 1.25
c. How much is the net working capital as of December 31, 2025? 497,500
d. How much is the book value per share as of December 31, 2025? 1.542