Accounting
What are the four financial statements?
What are the two “buckets” of valuation?
2. Relative valuation.
Formula to calculate equity value.
Share price x shares outstanding.
Name 2 elite boutiques.
Name one famous activist investor.
What are the two criteria that must be met in order for revenue to be recorded?
1. Must be in the corresponding time period of the income statement.
2. It must affect the company's tax.
What is the formula for levered free cash flow?
Net income + D&A - Changes in NWC - CapEx - Mandatory Debt Repayment
What is one example of non-capital structure neutral multiple?
P/E
What is the difference between leveraged finance and DCM?
The leveraged finance team deals with high-yield debt, while DCM deals with investment-grade debt.
In 2019YTD, which investment bank has generated the most investment banking revenue so far?
J.P Morgan
Other than depreciation and amortization, what is another example of a non-cash expense?
1. Stock-based compensation.
2. Gains / losses on sales of PP&E.
3. Impairment charges.
I have a company generating $300 in EBITDA, trading at a 5x EV/EBIT multiple. What is my company worth?
You need to know what D&A is so you can get down to EBIT from EBITDA.
What is capital structure?
Capital structure is just the investments made in a company, organized by the priority that the investors get in a bankruptcy.
Why do bulge bracket investment banks rarely have restructuring arms?
Conflict of interest, as bulge bracket banks are usually the ones providing the DIP financing.
What legislation required the separation of investment and commercial bank activities?
Glass-Steagall Act.
Inventory goes up by $100; how does this affect the 3 financial statements?
I/S: No changes
CFS: Cash outflow of $100 in CFO. The total cash is down $100.
BS: Cash is down $100, inventory is up $100. Balances.
What do you use to discount unlevered free cash flow? How do you calculate it?
WACC = % of equity x cost of equity + % of debt x cost of debt x (1 - tax rate)
In the formula, EV = Equity Value + Debt + NCI + Preferred Stock - Cash, what is another line item we can add or subtract to the equation?
Add anything that may be related to another investor group. (Unfunded pension obligation)
Subtract anything that may be non-core operating assets. (PP&E held for sale)
What is a secondary offering?
A secondary offering, also known as a follow-on offering is the issuance of stocks subsequent to the company's IPO.
Who is the current CEO of Credit Suisse?
Tidjane Thiam.
How does a $10 decrease in prepaid expenses impact the three statements? Assume a 20% tax rate.
I/S: EBT is down 10, with 20% tax rate, the NI is down 8.
CFS: Net income is down $8, prepaid expenses up by $10. CFO is up by $2. The total change in cash is up $2.
BS: Cash is up by $2, the prepaid expense is down by $10, assets is down by $8 in total. Retained earnings down by $8.
You have a company with $100 EV, $400 of Debt, and no cash. How is this possible?
Equity value cannot be negative. Debt is trading at a discount.
What is the calculation for LTM?
Last fiscal year + new stub - old stub.
Which bulge bracket investment banks have separate M&A groups?
Bank of America
Citi
Credit Suisse
J.P Morgan
Morgan Stanley
UBS
What is the largest leveraged buy-out in deal size to date?
TXU Energy went private at $45 billion led by KKR and TPG.
This could change soon.