Chapter 4 : Guideline Public Company Method

Question 1 of 13

1. The valuation professional should consider which of the following when selecting guideline public companies?
i. Revenue
ii. Industry
iii. Operating Segments

i only

ii only

i and ii only

i and iii only

ii and iii only

i, ii, and iii

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Question 1 of 13

Question 2 of 13

2. Which contains public company equity transaction information?

Yahoo! Finance

BIZCOMPS

Pratt’s Stats

All of the above

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Question 2 of 13

Question 3 of 13

3. Which of the following is NOT one of the largest stock exchanges in the world?

Deutsche Bourse

LSE

CST

Japan

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Question 3 of 13

Question 4 of 13

4. The Guideline Public Company Method produces what kinds of multiples:

Price Multiples

Market V alue of Indicated Capital Multiples

Asset Multiples

None of the Above

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Question 4 of 13

Question 5 of 13

5. One of the advantages of the Guideline Public Company Method is that

The values derived are inclusive of market and economic factors as of the valuation date based on independent arms-length activity

The degree of adjustment when valuing similar minority interests in large privately-held entities can often times be reduced to considerations for lack of marketability

The underlying data is considered to be fairly reliable given the degree of scrutiny publicly traded companies must undergo

All of the above

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Question 5 of 13

Question 6 of 13

6. Which of the following statements regarding research on the effect of size on market multiples is NOT true:

Empirical studies have more often focused on rates of return rather than multiples

Pitchbook has recently conducted research on private equity and venture capital multiples

Findings on the effect of size on rates of return can be considered to shed light on the relationship between size and market multiples

Research on the effect of size on market multiples indicates that multiples do not change across size categories

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Question 6 of 13

Question 7 of 13

7. Which of the following is one of the largest U.S. Stock Exchanges?

NYSE

LSE

TMX

CME

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Question 7 of 13

Question 8 of 13

8. Which of the following should be done in the Guideline Public Companies Method?

Compare the guideline companies' financial data to the subject company

Make normalization adjustments to the subject company, where appropriate

Make normalization adjustments to the guideline companies, where appropriat

All of the above

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Question 8 of 13

Question 9 of 13

9. The single most important factor below that limits the applicability of the Guideline Public Company Method is

The lack of information available about the comparables

The substantial costs involved in the collection of information about the comparables

The data is typically dated

The relevant size of the subject company compared to its publicly traded peer group

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Question 9 of 13

Question 10 of 13

10. Which of the following are considered primary market methods?

Rule of Thumb and Guideline Public Company Methods

Guideline Public Company and Completed Transactions Methods

Completed Transactions and Rule of Thumb Methods

Subscription Models and Guideline Public Company Methods

Completed Transactions Methods and Subscription Models

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Question 10 of 13

Question 11 of 13

11. Which of the following are equity multiples

Price to Earnings

Book Value to EBITDA

Book Value of Total Capital to Sales

Interest Coverage Ratio

Market Value of Invested Capital to EBITDA

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Question 11 of 13

Question 12 of 13

12. Implicit in the calculation derived under the Guideline Public Company Method is the balance sheet, therefore:
iii. No adjustment is required for the subject’s routine balance sheet items.
iv. Extraordinary and non-operating balance sheet items of the subject company need to be
taken into consideration.

i only

ii only

neither i nor ii

iandii

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Question 12 of 13

Question 13 of 13

13. Which of the following is the most compelling reason to use the Guideline Public Company Method:

It provides a verifiable and objective measure of value derived from actual transactions of similar interests

Its use is required by Revenue Ruling 59-60

It is the required method when valuing controlling interest

It provides a verifiable and objective measure of value derived from publicly available information

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Question 13 of 13