General Finance
what are 5 valuation methods
Public Comps
Acquisition Comps
DCF
Merger Consequences
Sum of the Parts
LBO
DDM
If they can't get 5: (DCF, Public comps, LBO)
What are the three financial statements
Income Statement, Balance Sheet, Cash Flow Statement
What is the first statement you should start with when writing the 3 financial statements
Income Statement - Net Income Account
The country of 'Merica calculates inflation using a consumer price index. Between 2016 and 2017 the CPI increased from 200 to 220. What is the inflation percentage
10%
What are Venture Capitalists
VC's provide funding to start up companies in exchange for equity. They evaluate business plans, assess potential for growth and profitability, and negotiate investment terms
What is the CAPM formula and what does it represent
a financial model that calculates the expected rate of return for an asset or investment.
CAPM = Rf * Beta ( Rm-Rf)
what are the major line items on each of the financial statements (give me 3 each)
Income Statement: Revenue; Cost of Goods Sold; SG&A (Selling, General & Administrative Expenses); Operating Income; Pretax Income; Net Income
Balance Sheet: Cash; Accounts Receivable; Inventory; Plants, Property & Equipment (PP&E); Accounts Payable; Accrued Expenses; Debt; Shareholders’ Equity.
Cash Flow: Net Income; Depreciation & Amortization; Stock-Based Compensation; Changes in Operating Assets & Liabilities; Cash Flow From Operations; Capital Expenditures; Cash Flow From Investing; Sale/Purchase of Securities; Dividends Issued; Cash Flow From Financing.
What is the accounting formula
Assets = Equity + Liabilities
Who is OpenAI partnered with and receives investments from
Microsoft
What are Financial Planners
Financial planners help individuals and families manage their finances and plan for their financial futures. They provide advice on retirement planning, investment strategies, tax planning, and other financial matters
What is RAROC and explain?
The risk-adjusted return on capital (RAROC) is a risk-adjusted return on investment measurement. RAROC is one of the most accurate techniques for determining a bank’s profitability
RAROC = (Revenues – Costs – Expected Losses) / Economic Capital
How do the 3 financial statements link together
“To tie the statements together, Net Income from the Income Statement flows into Shareholders’ Equity on the Balance Sheet, and into the top line of the Cash Flow Statement.
Changes to Balance Sheet items appear as working capital changes on the Cash Flow Statement, and investing and financing activities affect Balance Sheet items such as PP&E, Debt and Shareholders’ Equity. The Cash and Shareholders’ Equity items on the Balance Sheet act as “plugs,” with Cash flowing in from the final line on the Cash Flow Statement.”
What’s the relationship between debt and Cost of Equity?
More debt means that the company is more risky, so the company’s Levered Beta will be higher – all else being equal, additional debt would raise the Cost of Equity, and less debt would lower the Cost of Equity.
Which merger was formally approved by the EU regulators for $69 billion
Microsoft acquisition of Activision Blizzard
What are Commercial Bankers
Commercial bankers work with businesses to provide financial services such as loans, lines of credit, and cash management services. They assess the creditworthiness of businesses and help them manage their financial operations
How do you calculate WACC?
Cost of Equity * (% Equity) + Cost of Debt * (% Debt) * (1 – Tax Rate) + Cost of Preferred * (% Preferred).
What is the best statement to understand the overall health in a company?
Cash Flow Statement
Gives a true picture of how much cash the company is actually generating, independent of all the non-cash expenses you might have.
What’s the formula for Enterprise Value?
Equity Value + Net Debt (Easy)
What is the current Federal Funds Rate Range?
What are Compliance Officers
Compliance officers ensure that an organization is operating in compliance with legal and regulatory requirements. They develop policies and procedures to ensure that the organization is following laws and regulations related to finance and other areas
Two companies are exactly the same, but one has debt and one does not – which one will have the higher WACC?
The one without debt will generally have a higher WACC because debt is “less expensive” than equity
Interest on debt is tax-deductible (hence the (1 – Tax Rate) multiplication in the WACC formula).
Debt is senior to equity in a company’s capital structure – debt holders would be paid first in a liquidation or bankruptcy scenario.
Intuitively, interest rates on debt are usually lower than the Cost of Equity numbers you see (usually over 10%). As a result, the Cost of Debt portion of WACC will contribute less to the total figure than the Cost of Equity portion will.
What is working capital and how is it used?
Working Capital = Current Assets – Current Liabilities.
If it’s positive, it means a company can pay off its short-term liabilities with its shortterm assets. It is often presented as a financial metric and its magnitude and sign (negative or positive) tells you whether or not the company is “sound.”
Could you ever end up with negative shareholders’ equity? What does it mean?
1. Leveraged Buyouts with dividend recapitalizations – it means that the owner of the company has taken out a large portion of its equity (usually in the form of cash), which can sometimes turn the number negative.
2. It can also happen if the company has been losing money consistently and therefore has a declining Retained Earnings balance, which is a portion of Shareholders’ Equity
How often does CPI Data come out?
Monthly
What are Insurance Underwriters
Insurance Underwriters evaluate insurance applications to determine the level of risk and the appropriate premiums. They also negotiate with brokers and agents to determine coverage terms.