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