Accounting
How does purchase of new equipment for $100, effect statements on the day or purchase and year after purchase
The day of: PPE +$100 Cash -$100
After a year: Dep Exp $10 Tax Benefit $4 NI -$6
CF: +10 Dep , +$4 OCF BS: +$4 CASH PPE -$10 Net Retained Earnings -$6
Description of a DCF
What is an intrinsic valuation?
The Unlevered Beta
What is Bu = BL / (1+(D/E*(1-t))
What is Net working capital, can it be negative?
Current assets - current liabilities
Can be negative (think of Amazon)
The three ways to value a company
What is DCF, Public Comparables, and Precedent Transactions
Walk me through a cash flow statement
What is ...start with NI go through major adjustments (Dep., NWC, deferred taxes), mention capital expenditure, and repurchase and issuance of debt and equity.
Time horizon used in a DCF model, and typical terminal growth rate
The CAPM
What is Rf + BL(1+D/E*(1-T))
What are equity buybacks/dividends, or invest in company?
The most expensive way to finance a capital project (debt or equity)
What is Equity? More expensive than debt because debt holders have first claim on assets; interest expense is tax deductible
Free Cash Flow Formula
What is...
Rev-COGS-Dep&Amor= EBIT
EBIT - Tax = NOPAT
NOPAT + Dep = Operating Cash Flow
OCF - CapEx - Chg. NWC = FCFF
Cash flow statement and Income statement connected with
What is...Net Income?
Would it be appropriate to look at market cap / EBITDA ratio when using market comps to value a company
No, it is not appropriate, numerator and denominator should match from same finance perspective.
AKA EV/EBITDA
Given revenue growth is 0%, how would a company increase NI?
Lowering variable cost or products sold
Fixed cost would remain fixed in the short-term