Buy Side Financial Modeling Study
Questions and Correct Answers
Forecasting Frameworks ✅1. Growth stack
2. Mix accelerator
3. Comp waterfall
4. Box replicator
5. Ramp curve
6. Creative lags
7. Mix extrapolation
8. Mid-cycle
9. Data correlations
Five Key Questions of the Fundamental Investor ✅1.) Is this a good business?
2.) How does this business actually make money?
- what is the dollar flow and unit economics?
3.) What is the nature of the cost structure?
- Primarily fixed or variable? Why does that distinction matter?
4.) What drives the business? What are key drivers?
5.) Is the business getting better or worse? Is the business momentum and current state
vs. future state improving?
- current vs. future: current state matters, but a lot of focus is where the business is
going in the future
How is stock price ultimately driven? ✅KPI drive profits --> profits drive cash flow -->
cash flow drives value --> value ultimately drives stock prices
What is the intent of a business? ✅To generate free cash flow - the more free cash
flow, the more valuable the business
What drives cash flow? ✅1. Revenue
2. Profit margin
3. Capital investment
What happens when a business is more capital intensive? ✅Compresses return on
equity and return on invested capital
Business value creation: 5 factors ✅1. Organic growth
2. Margin trajectory
- expanding
3. Capital intensity
- minimal
Questions and Correct Answers
Forecasting Frameworks ✅1. Growth stack
2. Mix accelerator
3. Comp waterfall
4. Box replicator
5. Ramp curve
6. Creative lags
7. Mix extrapolation
8. Mid-cycle
9. Data correlations
Five Key Questions of the Fundamental Investor ✅1.) Is this a good business?
2.) How does this business actually make money?
- what is the dollar flow and unit economics?
3.) What is the nature of the cost structure?
- Primarily fixed or variable? Why does that distinction matter?
4.) What drives the business? What are key drivers?
5.) Is the business getting better or worse? Is the business momentum and current state
vs. future state improving?
- current vs. future: current state matters, but a lot of focus is where the business is
going in the future
How is stock price ultimately driven? ✅KPI drive profits --> profits drive cash flow -->
cash flow drives value --> value ultimately drives stock prices
What is the intent of a business? ✅To generate free cash flow - the more free cash
flow, the more valuable the business
What drives cash flow? ✅1. Revenue
2. Profit margin
3. Capital investment
What happens when a business is more capital intensive? ✅Compresses return on
equity and return on invested capital
Business value creation: 5 factors ✅1. Organic growth
2. Margin trajectory
- expanding
3. Capital intensity
- minimal
