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Trading Comps Modeling Exam Wall
Street Prep - Wall Street Prep Premium
Exam
SECTION A – CONCEPTS & THEORY
1.
What is the primary purpose of a Trading Comps analysis?
A. Determine intrinsic value via discounted cash flows
B. Compare a company’s valuation multiples to peers
C. Forecast future cash flows
D. Value illiquid private assets
Answer: B
Rationale: Trading comps (relative valuation) benchmark valuation multiples of a company
against similar publicly traded peers.
2.
Which multiple is most commonly used in Trading Comps for profitability?
A. EV/EBITDA
B. P/E
C. EV/Revenue
D. Price/Book
Answer: A
Rationale: EV/EBITDA captures enterprise value relative to operating profitability before
non-cash items and capital structure.
3.
Why do we use Enterprise Value (EV) rather than Market Cap for most Trading Comps
multiples?
A. To include debt and cash effects
B. Because EV is always larger
C. Market Cap is only for private companies
D. To undervalue companies
practice exam 2026
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Answer: A
Rationale: EV represents the total value of operations, inclusive of equity and debt, and less
cash.
4.
A higher P/E multiple generally implies:
A. The stock is undervalued
B. The market expects higher future growth
C. The company has more debt
D. The company has negative earnings
Answer: B
Rationale: Higher P/E reflects optimism about earnings growth or lower risk.
5.
What does EV/Revenue measure?
A. Equity value per dollar of revenue
B. Enterprise value per dollar of revenue
C. Profitability per dollar of revenue
D. Cash flow efficiency
Answer: B
Rationale: EV/Revenue compares overall firm value to top-line sales.
6.
A comps universe should generally have:
A. Identical financials
B. Similar business models and risk profiles
C. Higher growth than the target
D. No correlation to the target
Answer: B
Rationale: Peers should be comparable in operations and risks.
practice exam 2026
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7.
Which of the following is NOT a common sector multiple?
A. EV/EBITDA
B. EV/EBIT
C. P/E
D. EV/Unlevered Beta
Answer: D
Rationale: Unlevered beta is not a valuation multiple.
8.
Which multiple is most sensitive to capital structure?
A. P/E
B. EV/EBITDA
C. EV/Revenue
D. Price/Cash Flow
Answer: A
Rationale: P/E reflects equity value directly and is impacted by leverage and interest.
9.
What is the typical denominator for EV/EBITDA?
A. Net income
B. EBITDA
C. Operating income after tax
D. Cash flows from operations
Answer: B
Rationale: EBITDA is used to standardize cash-based profitability.
10.
If a company’s multiple is significantly higher than its peers’, it may indicate:
A. Lower growth expectations
B. Higher growth or lower risk
C. An accounting error only
D. Better tax optimization
practice exam 2026
Trading Comps Modeling Exam Wall
Street Prep - Wall Street Prep Premium
Exam
SECTION A – CONCEPTS & THEORY
1.
What is the primary purpose of a Trading Comps analysis?
A. Determine intrinsic value via discounted cash flows
B. Compare a company’s valuation multiples to peers
C. Forecast future cash flows
D. Value illiquid private assets
Answer: B
Rationale: Trading comps (relative valuation) benchmark valuation multiples of a company
against similar publicly traded peers.
2.
Which multiple is most commonly used in Trading Comps for profitability?
A. EV/EBITDA
B. P/E
C. EV/Revenue
D. Price/Book
Answer: A
Rationale: EV/EBITDA captures enterprise value relative to operating profitability before
non-cash items and capital structure.
3.
Why do we use Enterprise Value (EV) rather than Market Cap for most Trading Comps
multiples?
A. To include debt and cash effects
B. Because EV is always larger
C. Market Cap is only for private companies
D. To undervalue companies
practice exam 2026
,2|Page
Answer: A
Rationale: EV represents the total value of operations, inclusive of equity and debt, and less
cash.
4.
A higher P/E multiple generally implies:
A. The stock is undervalued
B. The market expects higher future growth
C. The company has more debt
D. The company has negative earnings
Answer: B
Rationale: Higher P/E reflects optimism about earnings growth or lower risk.
5.
What does EV/Revenue measure?
A. Equity value per dollar of revenue
B. Enterprise value per dollar of revenue
C. Profitability per dollar of revenue
D. Cash flow efficiency
Answer: B
Rationale: EV/Revenue compares overall firm value to top-line sales.
6.
A comps universe should generally have:
A. Identical financials
B. Similar business models and risk profiles
C. Higher growth than the target
D. No correlation to the target
Answer: B
Rationale: Peers should be comparable in operations and risks.
practice exam 2026
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7.
Which of the following is NOT a common sector multiple?
A. EV/EBITDA
B. EV/EBIT
C. P/E
D. EV/Unlevered Beta
Answer: D
Rationale: Unlevered beta is not a valuation multiple.
8.
Which multiple is most sensitive to capital structure?
A. P/E
B. EV/EBITDA
C. EV/Revenue
D. Price/Cash Flow
Answer: A
Rationale: P/E reflects equity value directly and is impacted by leverage and interest.
9.
What is the typical denominator for EV/EBITDA?
A. Net income
B. EBITDA
C. Operating income after tax
D. Cash flows from operations
Answer: B
Rationale: EBITDA is used to standardize cash-based profitability.
10.
If a company’s multiple is significantly higher than its peers’, it may indicate:
A. Lower growth expectations
B. Higher growth or lower risk
C. An accounting error only
D. Better tax optimization
practice exam 2026
