Multiple Choice Questions (25)
Q1
MCQ
MediumMarket Capitalization
A company has issued 1,00,000 shares which are currently trading at Rs. 20 per share. What is the company's Market Capitalization?
ARs. 20,000
BRs. 2,00,000
✓Rs. 20,00,000
DRs. 2,00,00,000
💡 Market Capitalization is computed as market price per share multiplied by total number of outstanding shares. So, 1,00,000 shares * Rs. 20/share = Rs. 20,00,000.
Q2
MCQ
HardEnterprise Value
When calculating Enterprise Value (EV) on a standalone basis for a parent company, which of the following components is subtracted from the sum of market values of common equity, preferred capital, and debt of the parent?
AValue of non-controlling interest
BMarket Value of Debt of the subsidiary
✓Cash, cash equivalents, and non-operating/non-strategic financial investments of the parent only.
DMarket Value of preferred capital of the subsidiary
💡 The standalone EV formula is: '[Market Value of common equity of the Parent + Market Value of preferred capital of the Parent + Market Value of Debt of the Parent] – (cash, cash equivalents and non-operating/non-strategic financial investments of the parent only)'.
Q3
MCQ
EasyMarket Capitalization
How is Market Capitalization (Market Cap) computed?
ABook Value per share multiplied by total number of outstanding shares.
BFace Value per share multiplied by total number of outstanding shares.
✓Market price per share multiplied by total number of outstanding shares.
DEnterprise Value divided by total number of outstanding shares.
💡 The text states, 'Market Capitalization (Market Cap)... is computed as market price per share of the company multiplied by total number of outstanding shares.'
Q4
MCQ
EasyEquity vs. Debt
Which of the following is a fundamental characteristic of equity investors?
AThey earn a fixed rate of interest on the principal invested.
BThey are lenders to the business.
✓They are owners of the business.
DTheir claim is restricted to periodic fixed interest and principal repayment.
💡 According to the text, 'Equity investors are owners of the business; debt investors are lenders to the business.'
Q5
MCQ
MediumIntrinsic Value vs. Market Value Strategy
In equity investing, what is the primary goal of investment strategies concerning intrinsic and market values?
ATo buy shares when intrinsic value is less than market value and sell when intrinsic value is greater than market value.
✓To buy shares when intrinsic value is perceived to be more than market value and sell when intrinsic value is perceived to be less than market value.
CTo ensure market value always equals intrinsic value.
DTo only invest in scrips where intrinsic value is exactly equal to market value.
💡 The text states, 'If the intrinsic value is perceived to be more than market value, the scrip is said to be undervalued... The goal of investment strategies is to buy undervalued shares and sell overvalued ones.'
Q6
MCQ
EasyEquity vs. Debt
Which of the following statements is TRUE regarding equity investors?
AThey earn a fixed rate of interest on the principal invested.
BThey are lenders to the business.
✓They participate in the management of the business.
DTheir claim is restricted to periodic fixed interest and principal repayment.
💡 The text states: 'Equity investors are owners of the business; debt investors are lenders to the business. Equity investors participate in the management of the business; debt investors do not.'
Q7
MCQ
EasyMarket Capitalization
What is 'Market Capitalization' (Market Cap) defined as?
AThe nominal price of a share.
BThe net-worth of the company.
✓The market price per share multiplied by total number of outstanding shares.
DThe present value of expected free cash flows from the asset.
💡 The text defines Market Capitalization as 'market price per share of the company multiplied by total number of outstanding shares'.
Q8
MCQ
EasyFace Value
How is the equity share capital of a company typically calculated?
ABy dividing net profit by the number of outstanding shares.
✓By multiplying the number of shares issued by its face value.
CBy multiplying the market price per share by the total number of outstanding shares.
DBy dividing the net-worth of the company by the number of outstanding shares.
💡 The text states: 'The equity share capital of the company is calculated by multiplying the number of shares issued by its face value.'
Q9
MCQ
MediumFace Value & Dividend
If a company with a Face Value of Rs. 20 declares a 30% dividend, what is the dividend amount per share?
ARs. 0.60
BRs. 3.00
✓Rs. 6.00
DRs. 20.00
💡 The dividend is calculated as a percentage of the face value. So, 30% of Rs. 20 is Rs. 6.00 (0.30 * 20 = 6).
Q10
MCQ
EasyEquity vs. Debt
Which of the following statements accurately describes debt investors?
AThey are owners of the business.
BThey participate in the management of the business.
✓They earn a fixed rate of interest on the principal.
DThey receive residual profits of the business.
💡 The text states, 'debt investors earn a fixed rate of interest on the principal and get back the principal at maturity.'
Q11
MCQ
MediumIntrinsic Value
How does Warren Buffett define intrinsic value?
AIt is the market value of all the assets of a company at any point in time.
✓It is the discounted value of the cash that can be taken out of a business during its remaining life.
CIt is the net profit divided by the number of outstanding shares.
DIt is the market price per share multiplied by total number of outstanding shares.
💡 The text quotes Warren Buffett as defining intrinsic value as 'the discounted value of the cash that can be taken out of a business during its remaining life'.
Q12
MCQ
EasyEarnings Per Share
How is Earnings Per Share (EPS) primarily calculated?
ANet Profit multiplied by the number of outstanding shares.
✓Net Profit divided by the number of outstanding shares.
CEarnings Before Interest and Taxes (EBIT) divided by the number of outstanding shares.
DMarket Price per share divided by the number of outstanding shares.
💡 The text states, 'EPS = Net Profit/ Number of shares outstanding'.
Q13
MCQ
HardEnterprise Value Calculation
Based on the provided example, calculate the Enterprise Value (EV) for a company with the following details: Market Capitalization = Rs. 34 crores, Preferred capital = Rs. 8.5 crores, Debt outstanding = Rs. 6.4 crores, Cash and equivalents = Rs. 2.5 crores, Financial investments = Rs. 1.4 crores. Assume preferred shares and debt are unlisted, and financial investments are at fair value.
✓Rs. 45.0 crores
BRs. 52.8 crores
CRs. 49.9 crores
DRs. 42.1 crores
💡 The text provides the formula and example calculation: EV = Market Value of common equity + Market Value of preferred capital + Market Value of Debt – (cash, cash equivalents and non-operating/non-strategic financial investments). EV = 34.0 + 8.5 + 6.4 – 2.5 – 1.4 = Rs. 45.0 crores.
Q14
MCQ
EasyFace Value
If a company with a Face Value of Rs. 10 declares a 30% dividend, what is the dividend per share?
ARs. 0.30
BRs. 1.00
✓Rs. 3.00
DRs. 30.00
💡 The text explains: 'When dividend is mentioned as a percentage, that percentage is reckoned with respect to the face value. For example, if a company with Face value of Rs. 10 declares 30% dividend, it means dividend of Rs. 3 per share.'
Q15
MCQ
EasyFace Value
What is the nominal price of a share known as?
AMarket Value
BBook Value
✓Face Value
DIntrinsic Value
💡 The text defines Face Value as 'The nominal price of a share is known as its face value.'
Q16
MCQ
MediumIntrinsic vs. Market Value
According to the text, what is the primary goal of investment strategies concerning intrinsic and market value?
ATo buy shares when intrinsic value is less than market value.
BTo sell shares when intrinsic value is more than market value.
✓To buy undervalued shares and sell overvalued ones.
DTo ensure intrinsic value always equals market value.
💡 The text states: 'If the intrinsic value is perceived to be more than market value, the scrip is said to be undervalued. If intrinsic value is perceived to be less than market value, the scrip is said to be overvalued. The goal of investment strategies is to buy undervalued shares and sell overvalued ones.'
Q17
MCQ
MediumFace Value Application
A company with a Face Value of Rs. 2 declares a 30% dividend. What is the dividend per share?
ARs. 0.30
✓Rs. 0.60
CRs. 2.00
DRs. 6.00
💡 The text states, 'if a company with Face value of Rs. 2 declares 30% dividend, it means dividend of Rs.0.60 per share.' (30% of Rs. 2 = 0.30 * 2 = Rs. 0.60).
Q18
MCQ
MediumEarnings Terminology
Which term refers to earnings of the most recent period up to the present, calculated on a rolling basis, such as Trailing Twelve Months (TTM) or Trailing 4 Quarters?
AHistorical earnings
BForward earnings
CNet profits
✓Trailing earnings
💡 The text defines 'Trailing earnings' as 'the earnings of the most recent period upto the present (usually the day/month of calculation). It is calculated on a rolling basis.'
Q19
MCQ
MediumEquity vs. Debt Risk/Return
Which statement best describes the nature of equity investment according to the text?
AIt represents a relatively lower risk, steady, income-oriented investment.
BIt generates a steady rate of return, provided the business remains profitable.
✓It is a risky, long-term, growth-oriented investment that can show high volatility.
DIt offers assurance of return to the investor, as its value is bound to fluctuate.
💡 The text states: 'Equity represents a risky, long-term, growth-oriented investment that can show a high volatility in performance... There is no assurance of return to the equity investor'.
Q20
MCQ
EasyBook Value
In simple terms, what does 'book value per share' mean if a company were to wind up?
AThe market price at which the share trades in the stock market.
✓The theoretical amount of money each share would get after fully honouring the business liabilities.
CThe cost which a new company would bear to set up with similar infrastructure.
DThe discounted value of its future benefits to the investors.
💡 The text states: 'In simple terms, book value per share means the theoretical amount of money each share would get in case the company was to wind up.'
Q21
MCQ
HardEquity vs. Debt Downside
If a business borrows funds at 12% but is only able to earn a return of 10% on the assets created by such borrowing, what is the consequence for equity shareholders?
AEquity investors will receive the excess 2% earned by the assets.
BThe debt investor receives only 12% as promised, with no impact on equity.
✓Equity shareholders have to forego some portion of their share of return to fulfil the commitment to lenders.
DThe business will default on debt payments, protecting equity shareholders.
💡 The text states: 'If the return is lower than the borrowing cost the equity shareholders have to forego some portion of their share of return to fulfil the commitment to the lenders.'
Q22
MCQ
MediumEquity vs. Debt Characteristics
According to the text, what is a key characteristic that distinguishes equity from debt as an asset class?
ADebt represents a higher risk, growth-oriented investment, while equity is lower risk and income-oriented.
BEquity capital must be returned after a specified time, while debt capital is available for as long as needed.
✓Equity investors participate in management, whereas debt investors do not.
DDebt investors enjoy fixed annual returns, but equity investors are assured of a minimum return.
💡 The text states, 'Equity investors participate in the management of the business; debt investors do not.' Option D is incorrect because equity investors do not enjoy any fixed annual return and there is no assurance of return.
Q23
MCQ
HardIntrinsic Value and Equity Investing
The text describes equity investing as 'an art as well as science.' Which of the following factors primarily contributes to the 'art' aspect of equity investing, making it not amenable to mathematical formulation?
AThe use of discounting rates to calculate the present value of future cash flows.
BThe reliance on historical earnings and trailing twelve months (TTM) data for valuation.
✓The assessment of qualitative factors like quality of management, marketing strategies, and financing capabilities, combined with complex human behavior in stock markets.
DThe goal of identifying and exploiting inefficiencies by comparing intrinsic value to market price.
💡 The text explicitly states: 'Qualitative factors that assess future potential of a company based on factors such as quality of management, marketing strategies, financing capabilities, and such, make equity investing an art as well as science. Stock markets where these estimates are made and acted upon through buying and selling of equity shares feature a social ecosystem of complex human behaviour. Investment decisions are influenced by behavioural and cognitive limitations of individuals acting in a group.'
Q24
MCQ
MediumEarnings Terminology
Why are Trailing Twelve Months (TTM) or Trailing 4 Quarters measures of earnings particularly useful for analysts?
AThey represent future revenue and cost projections.
BThey reflect earnings from previous years, indicating long-term trends.
✓They are useful for valuation at any point in time, especially when it is not the financial or quarterly year-end.
DThey are the only measures that capture net profits available to equity owners.
💡 The text states, 'These measures of financials are quite useful, when the analysts undertake valuation of any firm, at any point in time, especially when it is not the financial or quarterly year end.'
Q25
MCQ
HardEnterprise Value
Based on the example provided, if a company has a Market Capitalization of Rs. 34 crores, Preferred capital of Rs. 8.5 crores, Debt outstanding of Rs. 6.4 crores, Cash and equivalents of Rs. 2.5 crores, and Financial investments of Rs. 1.4 crores, what is its Enterprise Value (EV) on a standalone basis?
✓Rs. 45.0 crores
BRs. 50.4 crores
CRs. 37.9 crores
DRs. 42.1 crores
💡 The formula for standalone EV is: [Market Value of common equity + Market Value of preferred capital + Market Value of Debt] – (cash, cash equivalents and non-operating/non-strategic financial investments). So, EV = 34.0 + 8.5 + 6.4 - 2.5 - 1.4 = Rs. 45.0 crores.
Case-Based Questions (1 sets)
Case 1
Case-Based
Equity Market Terminology and Valuation Metrics
Tech Innovators Ltd. (TIL) is a rapidly growing technology firm that recently announced its robust financial results for the latest fiscal period. The company has a total of 10 million equity shares outstanding, each carrying a face value of Rs. 10. In the secondary market, TIL's shares are actively traded, with the current market price standing at Rs. 250 per share. According to its most recent balance sheet, the company's net worth is reported at Rs. 1,800 million. Beyond its equity structure, TIL also has Rs. 500 million in outstanding long-term debt. Furthermore, the company maintains a healthy liquidity position with Rs. 150 million in cash and cash equivalents, alongside Rs. 50 million in non-operating financial investments. For the trailing twelve months (TTM), TIL reported an impressive net profit of Rs. 200 million. A senior research analyst is meticulously evaluating TIL, considering its current market valuation, historical performance, and future growth prospects. The analyst aims to determine whether the stock is undervalued, fairly valued, or overvalued based on a comprehensive set of valuation metrics. Additionally, the analyst is aware of the significant capital expenditure required for new competitors to enter this sector, noting that the cost to replicate TIL's existing infrastructure and assets today would be substantially higher than their book value.
Hard Sub-question 1
Calculate the Enterprise Value (EV) for Tech Innovators Ltd. on a standalone basis, using the provided information.
ARs. 2,500 million
✓Rs. 2,800 million
CRs. 2,900 million
DRs. 2,700 million
💡 Enterprise Value (EV) = Market Value of common equity + Market Value of Debt - Cash & Cash Equivalents - Non-operating/non-strategic financial investments. Market Value of common equity (Market Cap) = Rs. 2,500 million. Debt = Rs. 500 million. Cash & Cash Equivalents = Rs. 150 million. Non-operating financial investments = Rs. 50 million. EV = 2,500 + 500 - 150 - 50 = Rs. 2,800 million.
Medium Sub-question 2
Based on the trailing twelve months (TTM) net profit, what is Tech Innovators Ltd.'s Earnings Per Share (EPS)?
ARs. 20.00
✓Rs. 2.00
CRs. 180.00
DRs. 0.20
💡 Earnings Per Share (EPS) is calculated as Net Profit divided by the number of outstanding shares. EPS = Rs. 200 million / 10 million shares = Rs. 2.00.
Medium Sub-question 3
What is the current Market Capitalization of Tech Innovators Ltd.?
ARs. 1,800 million
✓Rs. 2,500 million
CRs. 100 million
DRs. 25,000 million
💡 Market Capitalization is calculated as Market Price Per Share multiplied by the total number of outstanding shares. Market Cap = Rs. 250/share * 10 million shares = Rs. 2,500 million.
Easy Sub-question 4
If Tech Innovators Ltd. declares a 25% dividend, what would be the dividend per share for its equity shareholders?
✓Rs. 2.50
BRs. 25.00
CRs. 10.00
DRs. 0.25
💡 Dividend percentage is always reckoned with respect to the face value of the share. Face Value = Rs. 10. Dividend = 25% of Rs. 10 = Rs. 2.50 per share.
About this content: These practice questions are based on the
NISM-Series-XV: Research Analyst Certification Examination Workbook (February 2026)
published by the National Institute of Securities Markets (NISM), Mumbai.
NISM is a SEBI-established institution. Questions cover Terminology in Equity and Debt Markets with verified answers and explanations.
BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI.
Last updated: .
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