Reading 37- LOS f ～ Q1－6 price, market, assets, current, valuation

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1.A valuation of a firm based on the current market price of its assets is referred to as the firm’s:

A)   liquidation value.

B)   going-concern value.

C)   operating value.

D)   depreciation recognition value.

2.Liquidation value is the:

A)   cash generated by terminating a business and selling its assets.

B)   present value of future cash flow less the possible liquidation cost.

C)   market value of the total assets less the market value of the total liabilities.

D)   book value of the total assets less the book value of the total liabilities.

3.Liquidation value is the:

A)   cash generated by terminating a business and selling its assets.

B)   present value of future cash flow less the possible liquidation cost.

C)   market value of the total assets less the market value of the total liabilities.

D)   book value of the total assets less the book value of the total liabilities.

4.A comparison between a firm’s going-concern valuation and its liquidation value will show that the going-concern value will always be:

A)   greater than the liquidation value.

B)   less than the liquidation value.

C)   the same as the liquidation value.

D)   equal to the present value of the expected continued operation of the firm.

5.A valuation of a firm based on the assumption that the firm will continue to operate is referred to as its:

A)   operating value.

B)   status quo value.

C)   going-concern value.

D)   ex ante value.

6.The present value of expected future cash flows is the firm's:

A)   liquidation value.

B)   book value.

C)   going-concern value.

D)   terminal value.

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1.A valuation of a firm based on the current market price of its assets is referred to as the firm’s:

A)   liquidation value.

B)   going-concern value.

C)   operating value.

D)   depreciation recognition value.

The correct answer was  A)

The liquidation value is based on the assumption that the firm will cease to operate and all of its assets will be sold.

2.Liquidation value is the:

A)   cash generated by terminating a business and selling its assets.

B)   present value of future cash flow less the possible liquidation cost.

C)   market value of the total assets less the market value of the total liabilities.

D)   book value of the total assets less the book value of the total liabilities.

The correct answer was  A)

Liquidation value is the cash generated by terminating a business and selling all of its assets.

3.Liquidation value is the:

A)   cash generated by terminating a business and selling its assets.

B)   present value of future cash flow less the possible liquidation cost.

C)   market value of the total assets less the market value of the total liabilities.

D)   book value of the total assets less the book value of the total liabilities.

The correct answer was  A)

Liquidation value is the cash generated by terminating a business and selling all of its assets.

4.A comparison between a firm’s going-concern valuation and its liquidation value will show that the going-concern value will always be:

A)   greater than the liquidation value.

B)   less than the liquidation value.

C)   the same as the liquidation value.

D)   equal to the present value of the expected continued operation of the firm.

The correct answer was  D)

It is not possible to state the relationship between the going-concern value and the liquidation value without examining the prospects for the firm and the current value of the assets. The going-concern value is equal to the present value of the expected dividends arising from continued operation.

5.A valuation of a firm based on the assumption that the firm will continue to operate is referred to as its:

A)   operating value.

B)   status quo value.

C)   going-concern value.

D)   ex ante value.

The correct answer was  C)

The going-concern value is based on the assumption that the firm will continue to operate and the firm’s value is the present value of its future dividends.

6.The present value of expected future cash flows is the firm's:

A)   liquidation value.

B)   book value.

C)   going-concern value.

D)   terminal value.

The correct answer was  C)

Going-concern value is the present worth of expected future cash flows generated by a business.