FINANCIAL STATEMENT MODELING 2025 EXAM |
QUESTIONS AND CORRECT ANSWERS | ALREADY
GRADED A+ | VERIFIED ANSWERS | LATEST EXAM
Public Information Book "PIB" - (ANSWER)This is the collection of all the
documents on a company needed for proper valuation:
1. The latest 10-K
2. The latest Q4 Press Release
3. Latest Equity Research and EPS consensus estimates
4. Last 6 months of big news (stock splits, acquisitions and other material
changes)
Where do you get the "base" case growth drivers from? (2 answers; one for public
one for private) - (ANSWER)1. For public companies, you get the information
from Equity Research Reports on the company.
2. For private companies, you get the information from the current predictions of
the management of the company (called "management" case)
How many years out do FSMs normally forecast? - (ANSWER)3-7 years (5 years
being the most common)
What are the two exceptions to the fact that forecasting line items take a
historical number and multiply it by a predicted growth driver? - (ANSWER)1.
Interest Income and Interest Expense - you have to understand projected debt
levels to derive a projected interest expense and will need projected cash
balances to get interest income
2. D&A Expense - this needs to be derived from PP&E projections
, What should you do if the information in an Equity Research Report is different
than what is reported on the company's latest 10-k? Why does this difference
occur? - (ANSWER)This difference is normally due to changes in laws surrounding
revenue recognition. As long as there are not major differences, it is ok to ignore
this and just use the 10-K data.
Equity Research Reports normally only go out 1-3 years in forecast data. An FSM
normally projects out beyond this time frame. How do you estimate the data
beyond the years that equity research provides? - (ANSWER)A lot of banks will
use a straight-line growth rate, which means they will just keep using the last
growth rate produced by the Equity Research Report. However, other methods
might be needed if you notice this number is abnormally high or low for the
company.
What are the two common approaches for forecasting revenue? - (ANSWER)1.
Grow revenue using an aggregate growth rate
2. Segment level detail and price*volume approach
How do you forecast COGS on the income statement forecasting? -
(ANSWER)Make a percentage COGS margin (COGS/revenue) assumption and then
back into a dollar amount of COGS. You should start with historical margins as a
benchmark and then either straight-line these margins into the forecast period or
reflect a thesis about why you plan to deviate from straight-line.
How do you forcast Operating Expenses? (Opex) What are the components of
Opex? - (ANSWER)Opex are all of the expenses related to the core operations of
QUESTIONS AND CORRECT ANSWERS | ALREADY
GRADED A+ | VERIFIED ANSWERS | LATEST EXAM
Public Information Book "PIB" - (ANSWER)This is the collection of all the
documents on a company needed for proper valuation:
1. The latest 10-K
2. The latest Q4 Press Release
3. Latest Equity Research and EPS consensus estimates
4. Last 6 months of big news (stock splits, acquisitions and other material
changes)
Where do you get the "base" case growth drivers from? (2 answers; one for public
one for private) - (ANSWER)1. For public companies, you get the information
from Equity Research Reports on the company.
2. For private companies, you get the information from the current predictions of
the management of the company (called "management" case)
How many years out do FSMs normally forecast? - (ANSWER)3-7 years (5 years
being the most common)
What are the two exceptions to the fact that forecasting line items take a
historical number and multiply it by a predicted growth driver? - (ANSWER)1.
Interest Income and Interest Expense - you have to understand projected debt
levels to derive a projected interest expense and will need projected cash
balances to get interest income
2. D&A Expense - this needs to be derived from PP&E projections
, What should you do if the information in an Equity Research Report is different
than what is reported on the company's latest 10-k? Why does this difference
occur? - (ANSWER)This difference is normally due to changes in laws surrounding
revenue recognition. As long as there are not major differences, it is ok to ignore
this and just use the 10-K data.
Equity Research Reports normally only go out 1-3 years in forecast data. An FSM
normally projects out beyond this time frame. How do you estimate the data
beyond the years that equity research provides? - (ANSWER)A lot of banks will
use a straight-line growth rate, which means they will just keep using the last
growth rate produced by the Equity Research Report. However, other methods
might be needed if you notice this number is abnormally high or low for the
company.
What are the two common approaches for forecasting revenue? - (ANSWER)1.
Grow revenue using an aggregate growth rate
2. Segment level detail and price*volume approach
How do you forecast COGS on the income statement forecasting? -
(ANSWER)Make a percentage COGS margin (COGS/revenue) assumption and then
back into a dollar amount of COGS. You should start with historical margins as a
benchmark and then either straight-line these margins into the forecast period or
reflect a thesis about why you plan to deviate from straight-line.
How do you forcast Operating Expenses? (Opex) What are the components of
Opex? - (ANSWER)Opex are all of the expenses related to the core operations of
