LBO MODELING TESTS
1. What is the purpose of an LBO modeling test?
Answer To evaluate your ability to build a functioning LBO model under time pressure and produce IRR,
MoM, and valuation outputs.
2. What skills are being tested in an LBO modeling test?
Answer Excel speed, modeling accuracy, understanding of debt schedules, equity returns, and PE logic.
3. What is the most important output in an LBO test?
Answer IRR and MoM multiple to equity investors.
4. What are the typical time limits for an LBO test?
Answer 30-90 minutes for a short test; 2-3 hours for a full take-home case.
5. What is usually provided in an LBO test?
Answer Income statement, limited assumptions, purchase price range, debt terms, and exit multiple
1/5
, guidance.
6. What is NOT usually provided in an LBO test?
Answer Fully detailed projections or advanced working capital schedules — you must build them.
7. What is the #1 most common mistake in LBO tests?
Answer Incorrect linking of debt schedules and interest expense.
8. Second most common mistake?
Answer Forgetting circularity (interest expense depends on avg. debt balance).
9. What is the quickest way to structure a simple LBO test?
Answer 1) Assumptions, 2) Sources & Uses, 3) Projections, 4) Debt schedule, 5) Exit, 6) IRR.
10. Why are simple projections acceptable in an LBO test?
Answer Accuracy matters less than consistency and correct logic (PE firms test structure, not
forecasting).
2/5
1. What is the purpose of an LBO modeling test?
Answer To evaluate your ability to build a functioning LBO model under time pressure and produce IRR,
MoM, and valuation outputs.
2. What skills are being tested in an LBO modeling test?
Answer Excel speed, modeling accuracy, understanding of debt schedules, equity returns, and PE logic.
3. What is the most important output in an LBO test?
Answer IRR and MoM multiple to equity investors.
4. What are the typical time limits for an LBO test?
Answer 30-90 minutes for a short test; 2-3 hours for a full take-home case.
5. What is usually provided in an LBO test?
Answer Income statement, limited assumptions, purchase price range, debt terms, and exit multiple
1/5
, guidance.
6. What is NOT usually provided in an LBO test?
Answer Fully detailed projections or advanced working capital schedules — you must build them.
7. What is the #1 most common mistake in LBO tests?
Answer Incorrect linking of debt schedules and interest expense.
8. Second most common mistake?
Answer Forgetting circularity (interest expense depends on avg. debt balance).
9. What is the quickest way to structure a simple LBO test?
Answer 1) Assumptions, 2) Sources & Uses, 3) Projections, 4) Debt schedule, 5) Exit, 6) IRR.
10. Why are simple projections acceptable in an LBO test?
Answer Accuracy matters less than consistency and correct logic (PE firms test structure, not
forecasting).
2/5
