Merger Model

Why would an acquisition be dilutive?

Accounting

What is Operating Margin?

Accounting

Where can you find Depreciation on the Income Statement?

Accounting

What is gross profit?

Accounting

What are some ways that companies can manipulate their earnings?

Valuation

What are the most common valuation multiples?

Merger Model

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

DCF

How do you calculate WACC for a private company?

Enterprise & Equity Values

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

Accounting

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

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 amortization?

Enterprise & Equity Values

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

LBO

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

LBO

What is the circular reference in an LBO?

Accounting

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

Accounting

What flows into Retained Earnings?

Accounting

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

Enterprise & Equity Values

Can a company have a negative Enterprise Value? How?

Valuation

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

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?

DCF

How do you determine the discount rate in a DCF?

LBO

Walk me through an LBO

Merger Model

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

Valuation

What are some problems with using a Comparable Companies analysis?

Enterprise & Equity Values

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

Valuation

What are the three main valuation methodologies?

Enterprise & Equity Values

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

Enterprise & Equity Values

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

Enterprise & Equity Values

What are the four most common valuation multiples?

LBO

What is the "tax shield" in an LBO?

Enterprise & Equity Values

Why do you subtract cash in the Enterprise Value formula?

Enterprise & Equity Values

What is the difference between Enterprise Value and Equity Value?

DCF

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

Accounting

What is the difference between goodwill and intangible assets?

Accounting

What is the difference between deferred revenue and accounts receivable?

DCF

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

DCF

What is beta?

Enterprise & Equity Values

Why do you add Minority Interest to Enterprise Value?

DCF

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

Accounting

How do the 3 financial statements tie together?

Accounting

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

LBO

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

LBO

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

Valuation

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

LBO

What are some characteristics that make a good LBO candidate?

Merger Model

Why does goodwill get created in an acquisition?

DCF

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

Accounting

Does Goodwill get amortized?

Accounting

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

Enterprise & Equity Values

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

Accounting

What is the relationship between CapEx and Depreciation?

DCF

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

Valuation

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

Accounting

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

Enterprise & Equity Values

How do you calculate Fully Diluted Shares Outstanding?

Accounting

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

Accounting

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

Valuation

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

Valuation

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

Merger Model

Walk me through a basic merger model

Enterprise & Equity Values

What is the formula for Enterprise Value?

Valuation

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

Accounting

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

Accounting

How is goodwill calculated?

Accounting

What are deferred tax assets and liabilities?

Accounting

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

DCF

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

Accounting

Walk me through the three financial statements

DCF

How do you calculate WACC?

DCF

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

LBO

What are the different levers in an LBO?

Enterprise & Equity Values

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

Accounting

What is goodwill?

Accounting

How do you calculate Free Cash Flow?

Merger Model

What are synergies? What kinds of synergies are there?

Accounting

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

Accounting

What is Goodwill Impairment?

DCF

Walk me through a DCF

LBO

What variables impact an LBO the most?

Accounting

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

DCF

What happens to WACC as you increase leverage?

DCF

How do you calculate terminal value?

Accounting

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

DCF

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

Merger Model

What is the difference between a merger and an acquisition?

DCF

How do you calculate beta?

Accounting

What is gross margin?

Merger Model

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

Accounting

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

Enterprise & Equity Values

How do you calculate Equity Value?

Valuation

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

DCF

How do you calculate cost of equity?

Accounting

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

Valuation

What are some problems with using a Precedent Transactions analysis?

DCF

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

LBO

What is a dividend recap?

Accounting

What is working capital?

Merger Model

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

DCF

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