Wall Street Oasis Exam Questions and Answers
100% Pass
What does private equity do? - ✔✔Buys pieces (equity) of companies with the goal of selling the equity
within 3-7 years for a profit
Who are LPs typically? - ✔✔Endowments, pension funds, sovereign wealth funds, wealthy individuals
and large corporations
Profit structure - ✔✔GP (PE firm) returns 80% of profit along with original investment to LPs. Remainder
(carried interest or carry) is split among the GP. LPs also pay an annual management fee to PE firms,
generally amounting to 2% of total assets under management (AUM).
Startup (Early Stage) Investing - ✔✔1. Seed Capital
2. Venture Capital
Seed Capital - ✔✔- Earliest dollars into new start-up
- Founder / family bootstrapping
- Angel investors or VCs
- Minority stake (5-10%) as preferred equity or warrants
- $0.5 - $5.0mm, 0% leverage
- Emphasis on: revenue / customer growth, achieving profitability or demonstrating ability to become
profitable
Venture Capital - ✔✔- Generally first round of institutional money
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,- Unprofitable high growth start-up
- Minority stake 5-10% as preferred equity or warrants
- Several rounds of funding are common
-$5.0mm - $25.0mm, 0% leverage
- Emphasis on: revenue / customer growth, more emphasis on profitability than seed stage
Growth Equity - ✔✔- Capital to help young, profitable, high growth businesses grow faster
- Typically minority stake (10-30%) as common/preferred or warrants
- $10.0mm - $100.0mm, 0% leverage
- Emphasis on: Revenue growth, Margin expansion, exit multiple expansion
Growth buyout - ✔✔- Same as growth equity but a majority stake
- Occasionally employs light leverage
- $20.0mm - $200.0mm, 0-50% leverage
- Potential for more return if leverage is utilized
PIPE (Private investment in public equity) - ✔✔- Purchase of large common / preferred equity stake (5-
20%) in the stock of a publicly traded company
- $25.0mm - $500.0mm
- Emphasis on: growth of target's stock price which appreciates in part due to the target's utilization of
cash from the PIPE
Carve out / divestiture - ✔✔- Same as LBO except investors purchase a part (often non-core) of a bigger
company rather than the whole thing
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,- $25.0mm - $5.0bn (50-80% debt)
- Emphasis on improving operations of what are frequently undermanaged assets
Leveraged buyout (LBO) - ✔✔- Majority control takeover
- Profitable, mature, lower growth public or private businesses
- Utilizes high debt / equity ratio to fund takeover
- $50.0mm - $10.0bn (50-80% leverage)
- Use of target's free cash flow to pay down debt (sometimes a top driver of returns)
- Revenue and profit margin expansion
- Exit multiple expansion
Distressed investment - ✔✔- Purchase, at a discount of the debt or equity of a company at risk of default
- Corporate restructuring, bankruptcies and financial covenant breaches are sources of these
opportunities
- $10.0mm - $5.0bn (0-95% leverage)
- Emphasis on correctly predicting that target will not default or you can help it turn around its
operations
Growth (mid stage) - ✔✔1. Growth equity
2. Growth buyout
Mature (late stage) - ✔✔- PIPE
- Carve out / divestiture
- LBO
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, - Distressed investments
The larger the fund size... - ✔✔the larger the deal size
How many deals per fund, generally? - ✔✔10-12 to remain diversified
Late stage deals generally require... - ✔✔larger equity checks
A goal of PE would be to... - ✔✔Migrate up the stage ladder to increase their AUM (and associated fees)
Diligence philosophies - ✔✔"Industry diligence" versus "financial engineering"
- Some firms have excellent lender relationships and capital structure optimization skills
- Focus more on financial side and outsource industry diligence
Management fees (AUM fees) are meant to cover... - ✔✔a PE firm's annual operating budget (enable the
firm to make new investments and manage existing portfolio)
Carried interest is earned from... - ✔✔Profits from successful exits and dividend recapitalizations
In order to earn full carried interest... - ✔✔A PE fund typically has to generate returns in excess of a
hurdle rate (usually 7-8%)
Other revenue sources for PE: - ✔✔1. Deal fees (Charges target a deal fee as a % of the total size)
2. Monitoring fees (compensation for the owners' ongoing monitoring and managerial assistance)
Optimal fund size - ✔✔Larger funds are frequently harder to invest successfully than smaller funds so
GPs must consider optimal fund size carefully especially since LPs are more likely to commit to the next
fund if the current one generates strong returns
Role structure - ✔✔1. Analyst
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100% Pass
What does private equity do? - ✔✔Buys pieces (equity) of companies with the goal of selling the equity
within 3-7 years for a profit
Who are LPs typically? - ✔✔Endowments, pension funds, sovereign wealth funds, wealthy individuals
and large corporations
Profit structure - ✔✔GP (PE firm) returns 80% of profit along with original investment to LPs. Remainder
(carried interest or carry) is split among the GP. LPs also pay an annual management fee to PE firms,
generally amounting to 2% of total assets under management (AUM).
Startup (Early Stage) Investing - ✔✔1. Seed Capital
2. Venture Capital
Seed Capital - ✔✔- Earliest dollars into new start-up
- Founder / family bootstrapping
- Angel investors or VCs
- Minority stake (5-10%) as preferred equity or warrants
- $0.5 - $5.0mm, 0% leverage
- Emphasis on: revenue / customer growth, achieving profitability or demonstrating ability to become
profitable
Venture Capital - ✔✔- Generally first round of institutional money
Page 1/36
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
,- Unprofitable high growth start-up
- Minority stake 5-10% as preferred equity or warrants
- Several rounds of funding are common
-$5.0mm - $25.0mm, 0% leverage
- Emphasis on: revenue / customer growth, more emphasis on profitability than seed stage
Growth Equity - ✔✔- Capital to help young, profitable, high growth businesses grow faster
- Typically minority stake (10-30%) as common/preferred or warrants
- $10.0mm - $100.0mm, 0% leverage
- Emphasis on: Revenue growth, Margin expansion, exit multiple expansion
Growth buyout - ✔✔- Same as growth equity but a majority stake
- Occasionally employs light leverage
- $20.0mm - $200.0mm, 0-50% leverage
- Potential for more return if leverage is utilized
PIPE (Private investment in public equity) - ✔✔- Purchase of large common / preferred equity stake (5-
20%) in the stock of a publicly traded company
- $25.0mm - $500.0mm
- Emphasis on: growth of target's stock price which appreciates in part due to the target's utilization of
cash from the PIPE
Carve out / divestiture - ✔✔- Same as LBO except investors purchase a part (often non-core) of a bigger
company rather than the whole thing
Page 2/36
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
,- $25.0mm - $5.0bn (50-80% debt)
- Emphasis on improving operations of what are frequently undermanaged assets
Leveraged buyout (LBO) - ✔✔- Majority control takeover
- Profitable, mature, lower growth public or private businesses
- Utilizes high debt / equity ratio to fund takeover
- $50.0mm - $10.0bn (50-80% leverage)
- Use of target's free cash flow to pay down debt (sometimes a top driver of returns)
- Revenue and profit margin expansion
- Exit multiple expansion
Distressed investment - ✔✔- Purchase, at a discount of the debt or equity of a company at risk of default
- Corporate restructuring, bankruptcies and financial covenant breaches are sources of these
opportunities
- $10.0mm - $5.0bn (0-95% leverage)
- Emphasis on correctly predicting that target will not default or you can help it turn around its
operations
Growth (mid stage) - ✔✔1. Growth equity
2. Growth buyout
Mature (late stage) - ✔✔- PIPE
- Carve out / divestiture
- LBO
Page 3/36
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
, - Distressed investments
The larger the fund size... - ✔✔the larger the deal size
How many deals per fund, generally? - ✔✔10-12 to remain diversified
Late stage deals generally require... - ✔✔larger equity checks
A goal of PE would be to... - ✔✔Migrate up the stage ladder to increase their AUM (and associated fees)
Diligence philosophies - ✔✔"Industry diligence" versus "financial engineering"
- Some firms have excellent lender relationships and capital structure optimization skills
- Focus more on financial side and outsource industry diligence
Management fees (AUM fees) are meant to cover... - ✔✔a PE firm's annual operating budget (enable the
firm to make new investments and manage existing portfolio)
Carried interest is earned from... - ✔✔Profits from successful exits and dividend recapitalizations
In order to earn full carried interest... - ✔✔A PE fund typically has to generate returns in excess of a
hurdle rate (usually 7-8%)
Other revenue sources for PE: - ✔✔1. Deal fees (Charges target a deal fee as a % of the total size)
2. Monitoring fees (compensation for the owners' ongoing monitoring and managerial assistance)
Optimal fund size - ✔✔Larger funds are frequently harder to invest successfully than smaller funds so
GPs must consider optimal fund size carefully especially since LPs are more likely to commit to the next
fund if the current one generates strong returns
Role structure - ✔✔1. Analyst
Page 4/36
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
