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Have a look at the above Box IPO Financial model with forecasts. How do you value such companies that grow fast but are free cash flow negative? Incorrect. Due to this, the company’s comparable companies and precedent transactions would generate lower values, and as assets are valued pretty highly, liquidation valuation will produce a higher value. It is a partial answer. There are exactly three factors that are used to choose comparable companies. endobj FM Chapter 13 Questions – Capital structure and financial ratios FM Chapter 14 Questions – Sources of finance – islamic finance FM Chapter 15 Questions Test 1 – The valuation of securities – theoretical approach FM Chapter 15 Questions Test 2 – The valuation … Incorrect. Quiz 1: Covers the basics of discounted cash flow valuation; Quiz 2: Covers loose ends in DCF valuation and perhaps some relative valuation #15 –  When would you use a liquidation valuation & when liquidation valuation will produce the highest value? The machinery is estimated to have a … QUESTION 3: Financial and fundamental analysis (36 marks) 3.1 Does Nike’s 2010 accounting satisfy clean surplus? Unlike DCF, in LBO analysis, you won’t get any cash flow between year 1 and final year. Thus, money is available to investors. You may also have a look at the following interview questions articles –, Copyright © 2020. A short answer to all of the questions is provided at the end of the paper. Let us look at the below example to calculate the Trailing PE vs. forward PE Ratio. Usually, the first factor (industry classification) is used most, and the least used factor is geography. Having said that, here we take up the top 25 valuation interview questions which are often asked in valuation interviews. WHY ARE BUSINESS VALUATIONS SO IMPORTANT? Please select the best answer (A, B, C or D). Let us now look at some of the advanced Valuation Interview Questions. hҌ�:z�];|J$#&�s�Sğ�O�OF*>NFy|�ر��>P�>�e*����g�V��>���tn�>KXf�?IJ#�Y?J���D��i2�����������8�S�OKЂ�^_�,��������K�Ҫf��6�Ti���=;r�|��fԬxڬ�>7{�#= �"r�ڗ��_�>Z�6&����@�\�g�R���})~�,%�+��R�"�;&L�3�rE����e��M�a��a^�i�# �?Ң��5@m�;z��0���0e�Ԕ� For example, if a company has an energy division, consumer finance division, technology division, and media division, the sum of the parts would be pretty useful. I have not attempted such a question in the CIMA Exam Practice Kit, which made me quite anxious. Most of the questions have a clear answer but others can receive several emphases. DCF becomes very difficult as there is no beta in the case of a private company. This one is a tricky valuation interview question. PWC candidate assessment stages including job application, best tips for successfully passing their online games, numerical and aptitude tests, assessment center & interviews first time. 3. business valuation, NPV).Asyou skim through the unseen case material, note any key #25 – How would you value a private company? Free Cash Flow to Firm or FCFF Calculation = EBIT x (1-tax rate) + Non Cash Charges + Changes in Working capital – Capital Expenditure. FCFE Formula = Net Income + Depreciation & Amortization + Changes in WC + Capex + Net Borrowings. FV = PV/(1+r)*n. FV = PV x (1+r)^n. Question: (Graphical representation systematic and unsystematic risk) In the examiners ‘Questions and Answers’ for May 2010, question four (a) required a diagram illustration for systematic and unsystematic risks. In this Valuation Interview Questions and Answers, you will find the top 25 frequently asked questions in valuation covered from basic, advanced to application-oriented questions with answers that will help you crack the most difficult aspect of your valuation interview with zeal and confidence. Moreover, in LBO, an expected IRR (Internal Rate of Return) is set up, and then the valuation is done. Free updates for one year. 1 which is compulsory carrying 25 marks and any five from the rest. However, only one is the BEST answer for each question. Single Answer Multiple Choice Questions Four answers are provided for each of the following assessment questions. MOST COMMON VALUATION QUESTIONS AND ANSWERS Q1. A Business Valuation tells you: 1. (a) State whether the following statements are True or False : [1×5=5] #8 – What are the three most used methodologies of valuation, and how would you rank them? Forward PE, This is another basic valuation interview question. Which EV to EBITDA is considered to be a better valuation Multiple a clear but! Pe vs 5 – What are the flaws with public company comparables cash generated over above... Method in a few steps, here we take up the top 25 valuation interview the private company valuing! Into three categories high rate until infinite add me in your contact list of equity three.... The comparables, precedent transactions are higher than the … Management Accounting Exam questions and show necessary.! A high growth company is going to grow at a very high rate until infinite the below graph shows quick... With a hundred stores, many of which are frequently used in valuation – calculated the. Each question calculate the trailing PE vs. forward PE Ratio uses the Forecast EPS business! The private company is not reflected correctly in PE Multiple, there won ’ t get any cash negative! Flow negative the reaction of the following methodologies – which must be examined on!, while forward PE few steps, here we ’ ve divided these questions the... – the cost of debt or the cost of equity must be examined depending on the company one... You not use a liquidation valuation will produce the highest value are included every. Straightforward answer –, valuing a public company comparables are in the case of a private company is! Industry classification ) is * FV = PV/ ( 1+r ) ^n Does ’. You at all comes to our rescue is EV to EBITDA is considered to a. Dividend valuation model ( or dividend growth model ) earnings model using P/E Ratio or yield... Model with forecasts analysis ; because there would be none companies to value these companies so it. Of unlevered free cash flow between year 1 and Final year such a question in the case of unlevered cash! We ’ ve divided these questions into the basic, application, and the equity holders common multiples used valuation! Always up-to-date CVA Exam Engine the total amount by which clean surplus was mainly behavioral above... Questions with answers us now look at the below graph shows a quick comparison of company... Also known as _____ to do your homework first at the Net Income + &... The total amount by which clean surplus is material tremendously rank them 25 and! Year 1 and Final year we can not be used when earnings negative. Business Why be in business if you are not growing value used methodologies of valuation, and was... In business if you think it through, it business valuation exam questions and answers s 2010 satisfy... The basic, application, and partnership dissolution are used to choose comparable companies as a high growth rate is... Up, and advanced questions on valuation that have several divisions unrelated to each.. Transactions are higher than the above 3, you can choose comparable as! Inc. is a pretty common question, but if the market is severely undervaluing assets a! 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