Valuations Questions Asked In Interview #7

  1. What are the benefits and drawbacks of FCF vs. Levered FCF vs. Unlevered FCF vs. Levered FCF?

  2. What are the most common value multiples?

  3. What is the formula for calculating Enterprise Value?

  4. What are some of the most typical business value multiples?

  5. What are some of the most commonly used equity multiples?

  6. Why is it possible for one company to trade at a higher multiple than another?

  7. How do you determine a company's value?

  8. What's the difference between enterprise value and equity value, and how do you calculate it?

  9. What does net debt involve?

  10. Is it possible for a firm to have a negative net debt?

  11. Why would a businesscompany issue equity rather than debt (or vice versa)?

  12. How much will it take to double a $100,000 investment with a 9% annual return in how many years?

  13. Why would a firm repurchase (or buy back) shares? What effect would this have on the stock price and the financial statements?

  14. Assume a 10% return on asset (ROA) and a 50/50 debt-to-equity capital structure. What is the Return on Equity (ROE)?

  15. Explain me free cash flow yield and compare it to dividend yield and P/E ratios.

  16. How do you factor for Convertible Bonds when calculating Enterprise Value?

  17. What is the difference between Shareholder's Equity and Equity Value?

  18. When determining valuation multiples, should you use Enterprise Value or Equity Value with net income?

  19. Because debt is less expensive than equity, the one without debt will have a greater WACC. Why?

  20. In a DCF analysis, let's say we assume a 10% revenue growth rate and a 10% Discount Rate. Which change will have the greatest impact: lowering revenue growth to 9% or decreasing the Discount Rate to 9%?

  21. What if we change the revenue growth rate to 1%? Would lowering the Discount Rate to 9% have a greater impact, or would lowering the Discount Rate to 5% have a greater impact?

  22. Let's imagine we want to use a DCF to assess all of these factors. What are some of the most commonly used sensitivity analyses?

  23. A company has a large debt balance and pays off a large amount of its debt principal each year. What effect does this have on a DCF?

  24. When calculating Free Cash Flow, should you use Equity Value or Enterprise Value?

  25. Suppose Operating income, tax rate, and equity value are all the same for both companies. Which company's P/E multiple will be higher?

  26. A company's EV/EBITDA ratio is currently 10x. It wants to sell an asset for twice what its EBITDA is worth. Will the Enterprise Value of the company improve or decrease as a result of the sale?

  27. Explain me in detail about a cash flow statement.

  28. What exactly is goodwill?

  29. What exactly is a deferred tax liability, and why can one arise?

  30. What is a deferred tax asset, and why would you want to create one?

  31.  What is "equity value" and "enterprise value" mean?

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