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Liabilities Amount Assets Amount

This document contains 10 questions and answers related to valuation of company shares. Some key details include: 1) Shares are typically valued when companies amalgamate, shares are purchased/sold, classes of shares are converted, companies are nationalized, or shares are used as security for loans. 2) Common methods to value shares include net assets value, yield value, and profit earning capacity value. 3) Calculating share value requires considering a company's balance sheet, profits, reserves, assets/liabilities, capital structure, and normal rates of return. The questions provide case studies applying various techniques to determine the value of different classes of equity shares. Calculations are shown for share values based on

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Vinushree J Pawar
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34 views5 pages

Liabilities Amount Assets Amount

This document contains 10 questions and answers related to valuation of company shares. Some key details include: 1) Shares are typically valued when companies amalgamate, shares are purchased/sold, classes of shares are converted, companies are nationalized, or shares are used as security for loans. 2) Common methods to value shares include net assets value, yield value, and profit earning capacity value. 3) Calculating share value requires considering a company's balance sheet, profits, reserves, assets/liabilities, capital structure, and normal rates of return. The questions provide case studies applying various techniques to determine the value of different classes of equity shares. Calculations are shown for share values based on

Uploaded by

Vinushree J Pawar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION BANK WITH ANSWERS

1. What is meant by valuation of shares?


2. What are the circumstances under which shares are valued
a) When amalgamation or absorption of companies take place.
b) When a block of shares are purchased or sold.
c) When one class of shares are converted into another class
d) When a company in nationalised
e) When shares are to be provide as security for loans and advances.
f) When shares are to be sold in the absence of a stock exchange
g)When the assets of finance or investment companies are to be valued

3. State the different methods of valuation of shares?


4. The following is the balance sheet of A company ltd., as on 31 st march
2018

LIABILITIES AMOUNT ASSETS AMOUNT

3000 Equity shares of 100 300000 Cash in hand 2000


each

1500, 8% preference 150000 Cash at bank 20000


shares of 100 each

General reserve 40000 Debtors 80000

Profit and loss a/c 10000 Stock in trade 140000

Bank Loan 50000 Land and 205000


building

creditors 15000 Furniture 30000

Goodwill 70000
Discount on 18000
shares

5.

LIABILITIES AMOUNT ASSETS AMOUNT

Share capital : 12% 100000 Good will 120000


preference shares of 10
each

Equity shares of 10 each 300000 Leasehold 350000


property

General reserve 80000 fixtures 60000

P and L a/c 70000 Investment 50000

Unsecured loans 100000 Current assets 75000

Current Liabilities 30000 Loans and 15000


advances

Preliminary 10000
expenses

Additional information:
a) Leasehold property and fixtures are valued at 400000 and 50000
respectively
b) Goodwill to be valued at 3 years purchase of average profits of the last 5
years. The profits were 70000 , 80000 ,75000 ,85000 and 80000
respectively.

6. Following are the particulars of Ramesh Ltd.,


Fixed assets 400000
Current assets 250000
50000 equity share of 10 each 500000
5000, 8% preference shares of 100 each 500000
Bank overdraft 40000
6% debentures 200000
Other current liabilities 60000
Goodwill 100000
The market value of fixed assets is 12% more than the book value and
that of current assets is 5% less than the book value. There is an
unrecorded liability of 5000. Assuming that preference shares have no
priority either as to dividend or to repayment of capital, ascertain the
value of equity shares

7. A company has as its capital the following:


100000, A equity shares of 1 each fully paid up
100000, B equity shares of 1 each, 0.75 paid up
100000, C equity shares of 1 each, 0.50 paid up
The estimated profits available are 36000 and the normal rate of
dividend is 8%.
Calculate the value of each type of equity shares
8. The following details are obtained from the books of Niharika ltd. As
on 30th June 2018.
a) 5000 equity shares of 10 each fully paid 50000
b) 5000 equity shares of 10 each, 7.50 paid up 37500
c) 5000 equity shares of 10 each, 5 paid up 25000
d) General reserve 25000
e) Creditors 62500
f) Fixed assets 90000
g) Current assets 100000
h) Normal average profit 15000
i) Estimated rate of capitalization purposes 10%
j) Transfer of profits to general reserve 20%. Calculate the value of each
type of shares by Net assets.

9. A company has the following types of equity capital:


10000 equity shares of 100 each
6000 equity shares of 100 each, 70 paid
4000 equity shares of 100 each, 60 paid
The profit of the company after tax is 149400 and the normal yield is
15%.
Calculated the value of each type of equity shares
10.From the following particulars of Vinod ltd., compute the value of
shares under Yield method:
a) Equity shares of 10 each 800000
b) Profits for the last 3 years- 75000,78000 and 87000
c) 20% is transferred to reserve
d) Normal rate of return 10%

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