Enterprise & Equity Values

What is the difference between Enterprise Value and Equity Value?

Accounting

What is goodwill?

Enterprise & Equity Values

Is it possible for a company to have a negative Equity Value? How?

Accounting

What is Operating Margin?

Accounting

What does it mean if a company has negative Working Capital?

LBO

Why do private equity firms use leverage when buying a company?

Merger Model

Why does goodwill get created in an acquisition?

Valuation

What are some other possible valuation methodologies besides the main three?

DCF

How do you calculate WACC for a private company?

LBO

Why would a PE firm perform a dividend recap of one of their portfolio companies?

Accounting

What are deferred tax assets and liabilities?

Accounting

What is the difference between deferred revenue and accounts receivable?

Merger Model

Why would a strategic acquirer typically be willing to pay more for a company than a private equity firm?

Accounting

What is the difference between goodwill and intangible assets?

Accounting

What's the difference between capital leases and operating leases?

DCF

Why do you usually project out 5-10 years in a DCF?

Valuation

When would it not make sense to use a DCF in a valuation?

DCF

What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

Accounting

What happens to the three financial statements if we use PIK interest?

Accounting

What is gross profit?

Enterprise & Equity Values

Why is debt added to Equity Value in the formula for Enterprise Value?

LBO

What is a dividend recap?

DCF

How do you calculate cost of equity?

Accounting

Does Goodwill get amortized?

Enterprise & Equity Values

Why do you add Minority Interest to Enterprise Value?

Valuation

What is a Sum of the Parts valuation and when would you use it?

Merger Model

What is the difference between a merger and an acquisition?

Accounting

Walk me through the three financial statements

LBO

What variables impact an LBO the most?

Valuation

How would you present your various valuation methodologies to a client?

Accounting

How do you calculate Free Cash Flow?

Accounting

What is Goodwill Impairment?

Accounting

How is goodwill calculated?

Accounting

What are some of the major line items on the Balance Sheet?

Accounting

What are some of the major line items on the Income Statement?

LBO

What is the circular reference in an LBO?

Valuation

When would you use an LBO analysis as a part of your valuation?

Enterprise & Equity Values

Why can't you use Equity Value / EBITDA as a multiple?

DCF

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

Accounting

What is the relationship between CapEx and Depreciation?

Accounting

What are some of the major line items on the Cash Flow Statement?

Merger Model

In an all-stock deal, how can you quickly tell if a deal will be accretive or dilutive?

DCF

How do you select the appropriate exit multiple when calculating terminal value?

DCF

How do you calculate terminal value?

LBO

What are some characteristics that make a good LBO candidate?

Accounting

How do you calculate LTM (last twelve months) financials?

Accounting

A company makes a $100 cash purchase of equipment on Dec. 31. How does this impact the three statements this year and next year?

Enterprise & Equity Values

What is the formula for Enterprise Value?

DCF

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

LBO

Walk me through an LBO

Accounting

What is working capital?

Accounting

Walk me through how $10 of Depreciation affects the three financial statements

Enterprise & Equity Values

How do you calculate Fully Diluted Shares Outstanding?

Accounting

If depreciation is a non-cash expense, why does it affect the cash balance on the Cash Flow Statement?

Merger Model

Is there a shortcut to determine whether a transaction is accretive or dilutive to shareholders?

DCF

What happens to WACC as you increase leverage?

DCF

What is a potential issue with basing terminal multiples on current public company multiples?

DCF

What is the mid-year convention and why would you use it in a DCF?

LBO

How could a PE firm boost its return in an LBO?

DCF

How do you calculate WACC?

Merger Model

What are synergies? What kinds of synergies are there?

Merger Model

A company with a higher P/E multiple acquires one with a lower P/E multiple. Is this deal accretive or dilutive?

LBO

What are the different levers in an LBO?

Accounting

What flows into Retained Earnings?

Merger Model

Walk me through a basic merger model

DCF

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

Valuation

What are some problems with using a Comparable Companies analysis?

Accounting

How does Inventory increasing by $10 affect the three financial statements?

Enterprise & Equity Values

When acquiring a company, should you look at Enterprise or Equity Value?

Accounting

Is it possible to have negative Shareholder's Equity? If so, how?

DCF

Walk me through a DCF

Accounting

Where can you find Depreciation on the Income Statement?

Valuation

What are the three main valuation methodologies?

Valuation

How would you rank the 3 major valuation methodologies from highest to lowest in expected value?

DCF

What is beta?

Enterprise & Equity Values

What is the difference between Equity Value and Shareholders' Equity?

Accounting

How do the 3 financial statements tie together?

Valuation

What is a Liquidation Valuation analysis and when would you use it?

Enterprise & Equity Values

How do you calculate Equity Value?

Enterprise & Equity Values

Can a company have a negative Enterprise Value? How?

DCF

How do you determine the discount rate in a DCF?

Accounting

What is amortization?

Accounting

How does $10 of Depreciation affect the three financial statements?

Accounting

What is gross margin?

Merger Model

What are some reasons for why a company would want to acquire another company?

Accounting

What are some ways that companies can manipulate their earnings?

Accounting

How does a company decide when to capitalize or expense a purchase?

Accounting

Why isn't the Income Statement affected by changes in Inventory?

Valuation

What are some problems with using a Precedent Transactions analysis?

Accounting

What are some examples of non-recurring charges that would be added back to a company's EBITDA?

Enterprise & Equity Values

Should you use the book value or the market value of each item when calculating Enterprise Value?

Merger Model

Why would an acquisition be dilutive?

DCF

What are the formulas for un-levering and levering Beta?

Enterprise & Equity Values

What are the four most common valuation multiples?

Enterprise & Equity Values

Why do you need to add Minority Interest to Enterprise Value?

DCF

How do you calculate beta?

Enterprise & Equity Values

Why do you subtract cash in the Enterprise Value formula?

LBO

What is the "tax shield" in an LBO?

Valuation

What are the most common valuation multiples?

DCF

Which company would we expect to have a higher beta, an industrials company or an internet company?