50 MCQ-PREMISE OF VALUATION: GOING CONCERN AND LIQUIDATION (INDIA)
Which premise of valuation assumes the business will continue to operate indefinitely?
A) Going Concern
B) Liquidation
C) Sale
D) Abandonment
Answer: A) Going Concern
What is the main focus in a liquidation premise of valuation?
A) Long-term profitability
B) Immediate sale of assets
C) Future growth prospects
D) Market competition
Answer: B) Immediate sale of assets
Which premise often results in a higher valuation, all else equal?
A) Liquidation
B) Going Concern
C) Sale
D) Bankruptcy
Answer: B) Going Concern
In India, which regulatory body oversees valuation practices?
A) SEBI
B) RBI
C) MCA
D) IBBI
Answer: D) IBBI
What is the key assumption behind the going concern premise?
A) Business will be sold soon
B) Business will continue to generate profits indefinitely
C) Business assets will be liquidated
D) Business will declare bankruptcy
Answer: B) Business will continue to generate profits indefinitely
Which valuation approach is least relevant under the liquidation premise?
A) Asset-based approach
B) Income approach
C) Market approach
D) Cost approach
Answer: B) Income approach
Under the going concern premise, which financial statement is most crucial?
A) Balance Sheet
B) Cash Flow Statement
C) Income Statement
D) Statement of Retained Earnings
Answer: C) Income Statement
Which Indian act governs the valuation of assets in insolvency and bankruptcy?
A) Companies Act, 2013
B) SARFAESI Act, 2002
C) Insolvency and Bankruptcy Code, 2016
D) SEBI Act, 1992
Answer: C) Insolvency and Bankruptcy Code, 2016
What is a key factor considered in the liquidation value of a company?
A) Market share
B) Depreciation
C) Replacement cost
D) Quick sale of assets
Answer: D) Quick sale of assets
Which method is commonly used for valuing a company under the going concern premise?
A) Liquidation method
B) Discounted cash flow method
C) Break-up value method
D) Scrap value method
Answer: B) Discounted cash flow method
What does the liquidation value represent?
A) Future earnings potential
B) Current market value of assets
C) Value of assets if sold individually
D) Book value of the company
Answer: C) Value of assets if sold individually
Which valuation method is most appropriate for a distressed company?
A) Going concern valuation
B) Liquidation valuation
C) Market valuation
D) Cost valuation
Answer: B) Liquidation valuation
Under the going concern premise, what is a critical assumption?
A) Immediate asset sale
B) Continued business operation
C) Bankruptcy
D) Corporate dissolution
Answer: B) Continued business operation
What does IBBI stand for in the context of valuation in India?
A) Indian Business and Banking Institute
B) Insolvency and Bankruptcy Board of India
C) International Business and Banking Institute
D) Indian Board of Business and Insolvency
Answer: B) Insolvency and Bankruptcy Board of India
Which of the following is NOT a premise of value?
A) Going concern
B) Liquidation
C) Market value
D) Abandonment
Answer: C) Market value
When valuing a company under the liquidation premise, which type of costs are considered?
A) Operating costs
B) Shutdown costs
C) Advertising costs
D) Expansion costs
Answer: B) Shutdown costs
Which document provides a comprehensive set of guidelines for valuers in India?
A) SEBI Regulations
B) IBBI Valuation Standards
C) RBI Guidelines
D) Companies Act, 2013
Answer: B) IBBI Valuation Standards
In the going concern premise, what is a typical characteristic of the income approach?
A) Focus on asset sales
B) Future income projections
C) Liquidation value of assets
D) Historical cost analysis
Answer: B) Future income projections
Which type of valuation is most likely used during bankruptcy proceedings?
A) Going concern
B) Liquidation
C) Market value
D) Cost value
Answer: B) Liquidation
Which premise of valuation is typically higher for a profitable company?
A) Liquidation
B) Going concern
C) Break-up value
D) Scrap value
Answer: B) Going concern
In India, who appoints valuers under the Insolvency and Bankruptcy Code?
A) SEBI
B) RBI
C) IBBI
D) NCLT
Answer: D) NCLT
Which premise assumes the business will not continue and assets will be sold?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
Which valuation premise considers the company’s ability to generate future cash flows?
A) Liquidation
B) Going concern
C) Asset value
D) Market value
Answer: B) Going concern
What is often the outcome for shareholders in a liquidation scenario?
A) Increased dividends
B) Loss of equity
C) Higher share price
D) Enhanced voting rights
Answer: B) Loss of equity
Which valuation approach is most relevant for ongoing businesses?
A) Liquidation approach
B) Income approach
C) Replacement cost approach
D) Book value approach
Answer: B) Income approach
Under the liquidation premise, which type of assets are given priority?
A) Tangible assets
B) Intangible assets
C) Future profits
D) Market share
Answer: A) Tangible assets
Which premise is generally applied in the valuation of a distressed business?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
What does the term ‘orderly liquidation’ refer to?
A) Immediate sale of assets at a loss
B) Gradual sale of assets to maximize value
C) Sudden shutdown of operations
D) Unplanned asset disposal
Answer: B) Gradual sale of assets to maximize value
Which valuation premise is most suitable for a company planning for long-term growth?
A) Liquidation
B) Going concern
C) Market value
D) Book value
Answer: B) Going concern
Under which premise is the fair market value of individual assets most relevant?
A) Going concern
B) Liquidation
C) Income value
D) Market value
Answer: B) Liquidation
Which document is essential for valuers under the IBC in India?
A) SEBI guidelines
B) IBBI regulations
C) Companies Act, 2013
D) RBI guidelines
Answer: B) IBBI regulations
Which premise of valuation is used when a company is expected to be sold soon?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
Which type of value is calculated when a business is assumed to continue indefinitely?
A) Liquidation value
B) Going concern value
C) Break-up value
D) Scrap value
Answer: B) Going concern value
Which valuation premise would likely result in the lowest valuation?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
In a liquidation scenario, who typically gets paid first?
A) Shareholders
B) Employees
C) Secured creditors
D) Unsecured creditors
Answer: C) Secured creditors
What is the main goal of a going concern valuation?
A) Assess asset liquidation value
B) Assess future profitability
C) Determine market value
D) Estimate liquidation costs
Answer: B) Assess future profitability
Which approach is generally not used in going concern valuation?
A) Income approach
B) Market approach
C) Liquidation approach
D) Asset-based approach
Answer: C) Liquidation approach
Under the liquidation premise, how are liabilities handled?
A) Ignored
B) Added to asset value
C) Subtracted from asset value
D) Reclassified as equity
Answer: C) Subtracted from asset value
In India, what role does the National Company Law Tribunal (NCLT) play in liquidation?
A) Approves company valuations
B) Manages asset sales
C) Oversees corporate liquidation proceedings
D) Regulates financial audits
Answer: C) Oversees corporate liquidation proceedings
Which valuation method considers future earnings under the going concern premise?
A) Asset-based method
B) Market method
C) Discounted cash flow
D) Cost method
Answer: C) Discounted cash flow
What is considered in the liquidation value of intangible assets?
A) Historical cost
B) Replacement cost
C) Immediate sale price
D) Market value
Answer: C) Immediate sale price
Which type of company is typically valued using the going concern premise?
A) Profit-generating company
B) Distressed company
C) Bankrupt company
D) Liquidated company
Answer: A) Profit-generating company
Which valuation premise focuses on a company’s ability to pay its debts?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
Which regulatory body in India issues guidelines for valuers?
A) SEBI
B) RBI
C) IBBI
D) NCLT
Answer: C) IBBI
What is the main difference between going concern and liquidation value?
A) Timeframe for valuation
B) Type of assets valued
C) Method of calculating earnings
D) Approach to debt settlement
Answer: A) Timeframe for valuation
Which premise of valuation is applied for a company expected to cease operations?
A) Going concern
B) Liquidation
C) Market value
D) Income value
Answer: B) Liquidation
In the context of IBC, what is a key consideration in the liquidation process?
A) Asset acquisition
B) Asset disposal
C) Business expansion
D) Profit generation
Answer: B) Asset disposal
Under the going concern premise, what is typically evaluated?
A) Future cash flow generation
B) Immediate asset sale price
C) Historical cost of assets
D) Market share
Answer: A) Future cash flow generation
Which scenario would most likely use a liquidation premise for valuation?
A) Growing business
B) Distressed business
C) Expanding company
D) Profitable startup
Answer: B) Distressed business
Which Indian law governs the insolvency process and valuation of companies?
A) Companies Act, 2013
B) SARFAESI Act, 2002
C) Insolvency and Bankruptcy Code, 2016
D) SEBI Act, 1992
Answer: C) Insolvency and Bankruptcy Code, 2016
