FINANCIAL STATEMENT MODELING
EXAM 2025 QUESTIONS AND ANSWERS
Public Information Book "PIB" - ANS 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) - ANS 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? - ANS 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? - ANS 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
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@COPYRIGHT BRAINBARTER 2025/2026
, 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? - ANS 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? - ANS 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? - ANS 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? - ANS 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? -
ANS Opex are all of the expenses related to the core operations of the company. These
include selling costs, general and administrative expense and Research and Development
expenses.
All of these expenses are driven by revenue growth or you develop a specific thesis to reflect
why you think that these forecasts will deviate from the typical revenue growth.
How do you forecast Stock-based Compensation Expense? (SBC) Why do you forecast it this
way? - ANS SBC is normally forecast as a percentage of revenue because employees will be
paid more and you will have more employees as revenue grows
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Page
@COPYRIGHT BRAINBARTER 2025/2026
EXAM 2025 QUESTIONS AND ANSWERS
Public Information Book "PIB" - ANS 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) - ANS 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? - ANS 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? - ANS 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
1
Page
@COPYRIGHT BRAINBARTER 2025/2026
, 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? - ANS 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? - ANS 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? - ANS 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? - ANS 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? -
ANS Opex are all of the expenses related to the core operations of the company. These
include selling costs, general and administrative expense and Research and Development
expenses.
All of these expenses are driven by revenue growth or you develop a specific thesis to reflect
why you think that these forecasts will deviate from the typical revenue growth.
How do you forecast Stock-based Compensation Expense? (SBC) Why do you forecast it this
way? - ANS SBC is normally forecast as a percentage of revenue because employees will be
paid more and you will have more employees as revenue grows
2
Page
@COPYRIGHT BRAINBARTER 2025/2026
