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Merger Model
A company with a higher P/E multiple acquires one with a lower P/E multiple. Is this deal accretive or dilutive?
Accounting
What is the relationship between CapEx and Depreciation?
Valuation
When would it not make sense to use a DCF in a valuation?
Accounting
What are some of the major line items on the Cash Flow Statement?
Valuation
What are some other possible valuation methodologies besides the main three?
Accounting
How do you calculate Free Cash Flow?
Accounting
How does Inventory increasing by $10 affect the three financial statements?
DCF
What are the formulas for un-levering and levering Beta?
DCF
What is a potential issue with basing terminal multiples on current public company multiples?
LBO
Why do private equity firms use leverage when buying a company?
DCF
Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?
Merger Model
What are some reasons for why a company would want to acquire another company?
LBO
How could a PE firm boost its return in an LBO?
DCF
How do you select the appropriate exit multiple when calculating terminal value?
DCF
Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections
Accounting
What is gross margin?
Enterprise & Equity Values
What is the difference between Enterprise Value and Equity Value?
Merger Model
Is there a shortcut to determine whether a transaction is accretive or dilutive to shareholders?
Accounting
What are some of the major line items on the Balance Sheet?
Valuation
How would you rank the 3 major valuation methodologies from highest to lowest in expected value?
DCF
Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?
Enterprise & Equity Values
What is the formula for Enterprise Value?
Accounting
What are some examples of non-recurring charges that would be added back to a company's EBITDA?
Accounting
What are some of the major line items on the Income Statement?
Accounting
What happens to the three financial statements if we use PIK interest?
LBO
Walk me through an LBO
Enterprise & Equity Values
Can a company have a negative Enterprise Value? How?
DCF
How do you calculate WACC?
Enterprise & Equity Values
Why can't you use Equity Value / EBITDA as a multiple?
Valuation
When would you use an LBO analysis as a part of your valuation?
Enterprise & Equity Values
When acquiring a company, should you look at Enterprise or Equity Value?
Merger Model
In an all-stock deal, how can you quickly tell if a deal will be accretive or dilutive?
Enterprise & Equity Values
Should you use the book value or the market value of each item when calculating Enterprise Value?
LBO
What are some characteristics that make a good LBO candidate?
Accounting
If depreciation is a non-cash expense, why does it affect the cash balance on the Cash Flow Statement?
DCF
Why do you usually project out 5-10 years in a DCF?
Enterprise & Equity Values
How do you calculate Equity Value?
DCF
What happens to WACC as you increase leverage?
Enterprise & Equity Values
Why is debt added to Equity Value in the formula for Enterprise Value?
LBO
Why would a PE firm perform a dividend recap of one of their portfolio companies?
Accounting
What is amortization?
Accounting
Walk me through how $10 of Depreciation affects the three financial statements
Accounting
How is goodwill calculated?
Accounting
Why isn't the Income Statement affected by changes in Inventory?
Merger Model
Why would an acquisition be dilutive?
Merger Model
Why would a strategic acquirer typically be willing to pay more for a company than a private equity firm?
Accounting
What is goodwill?
Valuation
What are some problems with using a Precedent Transactions analysis?
Accounting
Does Goodwill get amortized?
Enterprise & Equity Values
What are the four most common valuation multiples?
Enterprise & Equity Values
Why do you subtract cash in the Enterprise Value formula?
DCF
How do you calculate WACC for a private company?
Valuation
What are some problems with using a Comparable Companies analysis?
LBO
What variables impact an LBO the most?
DCF
Which company would we expect to have a higher beta, an industrials company or an internet company?
DCF
How do you determine the discount rate in a DCF?
LBO
What is the circular reference in an LBO?
Accounting
What are deferred tax assets and liabilities?
DCF
What is beta?
Enterprise & Equity Values
Why do you need to add Minority Interest to Enterprise Value?
Enterprise & Equity Values
How do you calculate Fully Diluted Shares Outstanding?
Accounting
What is working capital?
Accounting
What is the difference between goodwill and intangible assets?
DCF
What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?
Accounting
How does $10 of Depreciation affect the three financial statements?
Enterprise & Equity Values
Why do you add Minority Interest to Enterprise Value?
Valuation
How would you present your various valuation methodologies to a client?
Accounting
Where can you find Depreciation on the Income Statement?
Accounting
What is Goodwill Impairment?
Merger Model
Walk me through a basic merger model
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?
Merger Model
What is the difference between a merger and an acquisition?
Accounting
How do you calculate LTM (last twelve months) financials?
Accounting
What are some ways that companies can manipulate their earnings?
Accounting
What flows into Retained Earnings?
DCF
How do you calculate beta?
LBO
What is the "tax shield" in an LBO?
Merger Model
Why does goodwill get created in an acquisition?
Accounting
What is Operating Margin?
Accounting
What is gross profit?
DCF
How do you calculate terminal value?
Accounting
What is the difference between deferred revenue and accounts receivable?
Enterprise & Equity Values
Is it possible for a company to have a negative Equity Value? How?
Accounting
Is it possible to have negative Shareholder's Equity? If so, how?
Valuation
What are the three main valuation methodologies?
Merger Model
What are synergies? What kinds of synergies are there?
Valuation
What are the most common valuation multiples?
DCF
How do you calculate cost of equity?
Accounting
How does a company decide when to capitalize or expense a purchase?
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 Sum of the Parts valuation and when would you use it?
LBO
What is a dividend recap?
Accounting
Walk me through the three financial statements
DCF
What is the mid-year convention and why would you use it in a DCF?
Valuation
What is a Liquidation Valuation analysis and when would you use it?
LBO
What are the different levers in an LBO?
Accounting
What's the difference between capital leases and operating leases?
DCF
Walk me through a DCF
Accounting
What does it mean if a company has negative Working Capital?
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