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Financial ABV Exam
Accredited in Business Valuation (ABV) (Page 5 )

Updated On: 12-Jan-2026
Page 5 of 70
PDF with 344 Questions

Automatic reliance on industry rates such as the return on total assets, tangible net worth or equity. This is the procedure which should NOT be used in the estimation of the:

  1. Indirect capitalization rate
  2. Direct capitalization rate
  3. Normalized level of earnings
  4. Tangible asset value

Answer(s): B



Most analysts agree that one of the most important factors in the estimation of the direct capitalization rate for the excess earnings is the perceived persistence of the excess earnings. The longer the time period and the greater the uncertainty of the expectation of excess earnings, the the direct capitalization rate.

  1. Lower
  2. Greater
  3. fixed
  4. It depends

Answer(s): A



There is no universally accepted conclusion as to what accounts should be "netted out" in the estimation of net tangible asset value. For example, various analysts have interpreted net tangible assets to mean any one of the following EXCEPT:

  1. Gross assets net of accumulated depreciation
  2. Net current value of the financial assets and the tangible assets less current liabilities only
  3. Net current value of the financial assets and the tangible assets minus all liabilities
  4. Probable future earnings

Answer(s): D



The work-in-process inventory of a professional service firm is essentially the unbilled receivables of the firm. Therefore, the same net realizable value rules discussed with respect to accounts and notes receivable would apply to this asset as well. With regard to tangible merchandise inventory, there are some common valuation methods such as:

  1. The cost of reproduction method
  2. The income expenditure method
  3. The comparative sales method
  4. A and C

Answer(s): D



Which of the following attribute should be there for an intangible asset to exist from an economic perspective?

  1. It should be subject to legal existence and protection
  2. It should be subject to specific identification and recognizable description
  3. It should be subject to right of private ownership
  4. All of these

Answer(s): D



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