NISM XV Valuation & Ratios — Practice Questions
Master valuation and financial ratios for the NISM Series XV Research Analyst exam — DCF, relative valuation, P/E, P/B, EV/EBITDA, ROE, CAGR and more, with worked explanations.
221 questions on Valuation & Ratios in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- DCF & intrinsic value
- Relative valuation (P/E, P/B, EV/EBITDA)
- Profitability & leverage ratios
- CAGR, ROE, ROCE
Free sample questions
1. Enterprise Value is computed as —
- A. Market Cap + Cash − Debt
- B. Market Cap + Debt − Cash ✅
- C. Market Cap − Debt − Cash
- D. Market Cap + Debt + Cash
Answer: B — Market Cap + Debt − Cash
Why: EV = Market Cap + Debt − Cash. It reflects what it would cost to buy the whole business: you assume its debt and get its cash.
💡 EV: add Debt, subtract Cash.
2. The Return on Capital Employed (ROCE) of company M/s. Hightech Industries Ltd. is 8% and the cost of debt is 10%. What will be the most likely Return on Equity (ROE)?
- A. ROE is likely to be below 8% ✅
- B. ROE is likely to be above 10%
- C. ROE will be 2%
- D. ROE will be between 8 to 10%
Answer: A — ROE is likely to be below 8%
Why: ROCE is 8% but the cost of debt is 10%. Since the company earns less on its capital than it pays on borrowings, debt reduces overall returns. This drags down shareholder returns, so the ROE will end up below 8%. In other words : ROCE shows how efficiently the company earns on total capital, while cost of debt is what it pays on borrowings. Here, the company earns 8% but pays 10% on debt, so borrowing is costlier than returns. This creates negative leverage, which reduces returns for equity shareholders (ROE). Hence, the ROE will be lower than 8%.
💡 If ROCE < cost of debt -> leverage HURTS -> ROE falls BELOW ROCE.
3. As per the rules of SEBI, the chairman of the Remuneration Committee should be _______ .
- A. An Independent director ✅
- B. An Executive director
- C. The Chairman of the Board
- D. A Non Executive director
Answer: A — An Independent director
Why: The remuneration committee decides the remuneration of directors and senior management. Ideally, the committee should comprise entirely of independent directors. SEBI regulation currently stipulates that all members should be non-executive directors and the chairman of the committee should be independent director .
💡 Remuneration Committee chair = INDEPENDENT director. (Remuneration -> Reliable -> Independent).
Practise all 221 Valuation & Ratios questions
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