Private Equity And LBO Analyst Interview Questions #2

  1. For the last ten years, a company has had a positive EBITDA, yet it recently went bankrupt. What are the chances of this happening?

  2. Walk me through how you will create a revenue model for a company.

  3. What are some examples of non-recurring charges that need to be added back to a company ?

  4. In a three-statement model, how do you estimate Balance Sheet elements like Accounts Receivable and Accrued Expenses?

  5. Tell me why do you need to add Minority Interest to Enterprise Value?

  6. When should a DCF not be used in a valuation?

  7. When is an LBO Analysis for use as part of a valuation?

  8. What are the three main uses of funds in a transactions

  9. What does the difference between maintenance and incurrence covenants ?

  10. In an LBO model, how does assuming debt work?

  11. What role do legal and advisory fees play in an LBO?

  12. What role do finance fees have in the LBO model?

  13. What happens if the company already has debt that is assumed in the LBO?

  14. What impact would a dividend recap have on an LBO's three financial statements?

  15. Why do inventory purchases have no effect on the revenue statement?

  16. Why would a business take money from a customer and not record it as revenue?

  17. What happens to cash collected if it's not recognized as revenue?

  18. How might it be that two companies with identical financial profiles are purchased by the same acquirer, but the EBITDA multiple for one transaction is twice that of the other?

  19. What is the difference between EV/EBIT, EV/EBITDA, and P/E?

  20. What is the formula for calculating WACC?

  21. What is the formula for calculating the Cost of Equity?

  22. what is the formula of calculation cost of debt?

  23. Which of two identical corporations, one with debt and the other without, will have the greater WACC?

  24. If you were given a million dollars, how would you spend it?

  25. What are the four key factors that influence the IRR in an LBO scenario?

  26. Explain me how do you model in PIK notes?

  27. What is the purpose of a convertible preference note for a private equity firm?

  28. How do you figure out how much intangible assets should be amortized?

  29. What is the purpose of surplus cash flow?

  30. Company A may make a 23 percent IRR, while Company B could make a 30 percent IRR. What are the two things you'd ask yourself before deciding which one to invest in?

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