BREAKING INTO WALL STREET EXAM STUDY
GUIDE QUESTIONS AND ANSWERS
company value - ✔✔Cash Flow / (Discount Rate - Cash Flow Growth Rate)
why do we need the 3 financial statements - ✔✔estimate cash flow so you can estimate the value of the
company
order of line items of income statement - ✔✔revenue - COGS = Gross Profit - Operating Expenses =
Operating Income +/- Other Income/Expense = Pretax Income - taxes = net income
income statement - ✔✔tracks revenues and expenses over a specific period; shows the things that impact
taxes
Free Cash Flow - ✔✔cash flow from operations - CapEx
net working capital - ✔✔current assets (excluding cash and investments) - current liabilities (excluding
debt)
change in net working capital - ✔✔old net working capital - new net working capital
positive change in net working capital - ✔✔frees up cash
negative change in net working capital - ✔✔uses cash
EBIT - ✔✔earnings before interest and tax; operating income
EBITDA - ✔✔Earnings before interest, taxes, depreciation, and amortization; operating income + D&A
NOPAT - ✔✔net operating profit after taxes; operating income*(1- tax rate)
Page 1/7
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
, Is EBIT unlevered or levered - ✔✔unlevered
is EBITDA unlevered or levered - ✔✔unlevered
is NOPAT unlevered or levered - ✔✔unlevered
What does DCF stand for? - ✔✔Discounted Cash Flow Analysis
what kind of valuation is DCF - ✔✔intrinsic
what is intrinsic valuation - ✔✔valuing a company based on its cash flows
what is relative valuation - ✔✔looking at comparable companies that are similar to the company you are
valuing based on size, growth, industry, etc and determine if the company you're valuing should be at a
premium or not based on the valuation multiples of the comparable companies
what are examples of intrinsic valuation - ✔✔DCF, Leveraged buy out model, precedent transaction
valuation multiple - ✔✔
what is a DCF - ✔✔an intrinsic valuation method that can be broken down into 3 parts: historical and
projection period, WACC, and terminal model
first we use historical financial data and we project that data forward to find future cash flows for the
next 5 years
then we calculate WACC which is the weighted average cost of capital to represent the opportunity cost
of investing in the company
the WACC formula is WACC = (%debt)(cost of debt)(1-tax rate) + (%equity)(cost of equity)
Page 2/7
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
GUIDE QUESTIONS AND ANSWERS
company value - ✔✔Cash Flow / (Discount Rate - Cash Flow Growth Rate)
why do we need the 3 financial statements - ✔✔estimate cash flow so you can estimate the value of the
company
order of line items of income statement - ✔✔revenue - COGS = Gross Profit - Operating Expenses =
Operating Income +/- Other Income/Expense = Pretax Income - taxes = net income
income statement - ✔✔tracks revenues and expenses over a specific period; shows the things that impact
taxes
Free Cash Flow - ✔✔cash flow from operations - CapEx
net working capital - ✔✔current assets (excluding cash and investments) - current liabilities (excluding
debt)
change in net working capital - ✔✔old net working capital - new net working capital
positive change in net working capital - ✔✔frees up cash
negative change in net working capital - ✔✔uses cash
EBIT - ✔✔earnings before interest and tax; operating income
EBITDA - ✔✔Earnings before interest, taxes, depreciation, and amortization; operating income + D&A
NOPAT - ✔✔net operating profit after taxes; operating income*(1- tax rate)
Page 1/7
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
, Is EBIT unlevered or levered - ✔✔unlevered
is EBITDA unlevered or levered - ✔✔unlevered
is NOPAT unlevered or levered - ✔✔unlevered
What does DCF stand for? - ✔✔Discounted Cash Flow Analysis
what kind of valuation is DCF - ✔✔intrinsic
what is intrinsic valuation - ✔✔valuing a company based on its cash flows
what is relative valuation - ✔✔looking at comparable companies that are similar to the company you are
valuing based on size, growth, industry, etc and determine if the company you're valuing should be at a
premium or not based on the valuation multiples of the comparable companies
what are examples of intrinsic valuation - ✔✔DCF, Leveraged buy out model, precedent transaction
valuation multiple - ✔✔
what is a DCF - ✔✔an intrinsic valuation method that can be broken down into 3 parts: historical and
projection period, WACC, and terminal model
first we use historical financial data and we project that data forward to find future cash flows for the
next 5 years
then we calculate WACC which is the weighted average cost of capital to represent the opportunity cost
of investing in the company
the WACC formula is WACC = (%debt)(cost of debt)(1-tax rate) + (%equity)(cost of equity)
Page 2/7
Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025
