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B Com Exam  >  B Com Tests  >  Test: Valuation Of Goodwill And Shares - 1 - B Com MCQ

Test: Valuation Of Goodwill And Shares - 1 - B Com MCQ


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10 Questions MCQ Test - Test: Valuation Of Goodwill And Shares - 1

Test: Valuation Of Goodwill And Shares - 1 for B Com 2025 is part of B Com preparation. The Test: Valuation Of Goodwill And Shares - 1 questions and answers have been prepared according to the B Com exam syllabus.The Test: Valuation Of Goodwill And Shares - 1 MCQs are made for B Com 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Valuation Of Goodwill And Shares - 1 below.
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Test: Valuation Of Goodwill And Shares - 1 - Question 1
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If the intrinsic value of a share of common stock is less than its market value, which of the following is the most reasonable conclusion?

Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 1
When the intrinsic value (true worth) of a stock is lower than its market price, it implies that investors are paying more than what the stock is fundamentally worth, indicating overvaluation by the market.
Test: Valuation Of Goodwill And Shares - 1 - Question 2
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Market-based methods of valuation should not be adopted when –

Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 2
Market-based methods rely on consistent and reliable market data. If the market prices are highly volatile or erratic, such methods become unreliable, and hence not suitable for valuation.
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Test: Valuation Of Goodwill And Shares - 1 - Question 3
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Market value method is generally the most preferred method in case of –

Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 3
For companies with actively traded shares on major stock exchanges, the market value method provides a fair and transparent valuation, based on real-time prices and volumes.
Test: Valuation Of Goodwill And Shares - 1 - Question 4
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The market value of share =
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 4
The market value of a share can be calculated using the formula:
Market Value = P/E Ratio × EPS,
where P/E is the price-to-earnings ratio and EPS is the earnings per share.
Test: Valuation Of Goodwill And Shares - 1 - Question 5
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The profits of last 5 years are ₹ 60,000; ₹ 67,500; ₹ 52,500; ₹ 75,000 & ₹ 60,000. Find the value of goodwill, if it is calculated on average profits of last 5 years on the basis of 3 years of purchase.
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 5
Step 1: Calculate average profit:
(60,000 + 67,500 + 52,500 + 75,000 + 60,000) ÷ 5 = ₹ 63,000
Step 2: Multiply average profit by 3 years of purchase:
63,000 × 3 = ₹ 1,89,000
Test: Valuation Of Goodwill And Shares - 1 - Question 6
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The profits of last 5 years are ₹ 60,000; ₹ 67,500; ₹ 52,500; ₹ 75,000 & ₹ 60,000. Find the value of goodwill, if it is calculated on average profits of last 5 years on the basis of 3 years of purchase.
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 6


Goodwill = Average Profit × No. of years purchases
= 63,000 × 3
= 1,89,000

Test: Valuation Of Goodwill And Shares - 1 - Question 7
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Find the goodwill of the firm using the capitalization method from the following information:
Capital employed = ₹ 4,80,000.
Rate of normal return = 15%.
Profits for the year = ₹ 90,000
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 7

Test: Valuation Of Goodwill And Shares - 1 - Question 8
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The average profit of a firm is ₹ 1,20,000. The rate of capitalization is 12%. Assets and liabilities of the company are ₹ 10,00,000 & ₹ 4,25,000 respectively.
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 8

Assets – Liabilities = Capital employed
10,00,000 – 4,25,000 = 5,75,000

Test: Valuation Of Goodwill And Shares - 1 - Question 9
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The net profits after tax of Z Ltd. for the past 5 years are as follows:

The capital employed is ₹ 16,00,000. The rate of normal return is 15%. Calculate the value of the goodwill on the basis of the annuity method on a super-profits basis, taking the present value of an annuity of ₹ 1 for the 4 years at 15% as ₹ 2.855.
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 9


Goodwill = 1,42,500 × 2.855 = 4,06,838
Answer:
(D) ₹ 4,06,838

Test: Valuation Of Goodwill And Shares - 1 - Question 10
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The following particulars are available in respect of the business carried on by X Ltd.:

You are required to compute the value of goodwill on the basis of 5 years purchase of average profit.
Detailed Solution for Test: Valuation Of Goodwill And Shares - 1 - Question 10

Goodwill = 30,000 × 5 = 1,50,000

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