Financial ABV Exam (page: 11)
Financial Accredited in Business Valuation (ABV)
Updated on: 25-Dec-2025

Viewing Page 11 of 70

The most frequently encountered reasons for needing to value debt securities are the following EXCEPT:

  1. Purchase or sale for cash
  2. Exchange of equity for debt, or vice versa
  3. Allocating total enterprise value among classes of securities in a leverages buyout, recapitalization (including)
  4. Adjusting an equity statement owned or owed

Answer(s): D



Most typically, a company, or some or all of its stock, is to be sold and a debt security received as all or part of the consideration. The seller needs to know the cash-equivalent value of the consideration being received in return for the company or stock being given up. It is uncommon for notes or other debt securities issued in connection with the acquisition of a company to have a cash equivalent value of the securities value.

  1. 20 percent of
  2. 20 percent more or below
  3. 20 more than
  4. 20 percent below

Answer(s): B



Recapitalizations involving debt securities may be undertaken for a variety of reasons. One common reason is:

  1. A leveraged Buyout
  2. A leveraged recapitalization
  3. Bankruptcy recapitalization
  4. Resource reallocation

Answer(s): B



Which of the following is NOT the advantage of leasing to the lessee?

  1. The financing terms of the lease usually take into considerations the lessor's ability to more efficiently use the tax advantages of asset ownership
  2. Most leases are short-term operating leases, and that reduces the transaction costs (i.e.
    identifying qualified buyers and complications associated with equipment obsolescence) at the end of anticipated period of use
  3. Installment sales agreements
  4. There is less of a capital commitment so that equity and borrowing power are freed for the other financing

Answer(s): C



The rate of interest that, when applied to the expected future payments equal to the debt security's observed market price is called the:

  1. Yield to maturity
  2. Return on investment
  3. Market interest
  4. Interest earning

Answer(s): A



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