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FM F Business valuations

Written by Mahnoor Sheikh (ACCA)

7 ACCA Financial Management questions with answers and explanations.

Printable worksheet with answer key

All questions with answers
  1. Earnings per share are $0.40 and a suitable P/E ratio is 12. What is the share value?

    • 1 $30.00
    • 2 $0.48
    • 3 $3.33
    • 4 $4.80
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    Correct answer: $4.80

    0.40 x 12 = 4.80.

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  2. Which valuation method looks at the value of net assets?

    • 1 The P/E method
    • 2 The CAPM
    • 3 Asset-based valuation
    • 4 The dividend valuation model
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    Correct answer: Asset-based valuation

    It ignores future earnings.

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  3. In the weak form of the efficient market hypothesis, prices reflect:

    • 1 All public information
    • 2 All information including private
    • 3 No information
    • 4 Past price information
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    Correct answer: Past price information

    Technical analysis cannot give extra returns.

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  4. In the semi-strong form, prices reflect:

    • 1 All publicly available information
    • 2 Only past prices
    • 3 Only private information
    • 4 No information
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    Correct answer: All publicly available information

    Fundamental analysis cannot give extra returns.

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  5. Irredeemable debt pays $6 a year and the required yield is 8 percent. What is its value?

    • 1 $48
    • 2 $80
    • 3 $6
    • 4 $75
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    Correct answer: $75

    6 / 0.08 = 75.

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  6. Which is a use of a business valuation?

    • 1 Deciding a price in an acquisition
    • 2 Preparing a payroll
    • 3 Counting inventory
    • 4 Choosing office furniture
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    Correct answer: Deciding a price in an acquisition

    Valuations are needed for acquisitions, flotations and disposals.

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  7. Which statement about the EMH is correct?

    • 1 Only technical analysis works
    • 2 All markets are strong-form efficient
    • 3 The strong form says even private information is already in the price
    • 4 Prices never change
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    Correct answer: The strong form says even private information is already in the price

    Evidence suggests that markets are not strong-form efficient.

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