Wall Street Prep
2026 Finance
Certification
Program Master
the Essential
Industry Skills
, Valuation - correct answer Process of determining the "right" value of a business, several approaches used,
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influenced by objectives of those doing the valuation q q q q q q q
How do you value a company? - correct answer There are a number of ways, mainly fall under two categories:
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1. Intrinsic Valuation - based on ability of company to generate cash flows. DCF is most common type of
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intrinsic valuation - looks at company's cash flow forecasts and risks.
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-Discounted Cash flow: value a company by looking at the future cash flows it can generate and discount them
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to the present to arrive at a present value of your business
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2. Relative Valuation - looks at multiples of comparable companies and applies mean/median multiple from
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peer group. Can be multiples of current market values (trading comps) or historical acquisition multiples (deal
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comps)
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-Comparable company analysis: value a company by finding similar companies that are public and have
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readily observable market prices.
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-Comparable (precedent) transactions analysis: value a company by looking at the amount buyers have paid
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for acquiring similar companies in the recent past
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How do you value a company when not using DCF or relative valuation? - correct answer 1. Leveraged Buyout
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Analysis: a specific type of valuation approach that looks at the value of a company to new acquirers under a
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highly leveraged scenario with specific return requirements. Hybrid of DCF and comps valuation.
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2. Liquidation (Bankruptcy) Analysis: value a company under a worst case liquidation scenario.
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What's the difference between equity and enterprise value? - correct answer Equity Value: the value of a
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business to its owners. q q q
=(Operating Assets - Operating Liabilities) + (Cash - Debt) q q q q q q q q
-Cash: includes cash as well as nonoperating assets like marketable securities, short term investments, equity
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investments
-Debt: includes straight debt (loans, revolver, bonds) as well as debt-like investments like capital leases, non-
q q q q q q q q q q q q q q q
controlling interests, preferred stock q q q
=Enterprise value - net debt q q q q
2026 Finance
Certification
Program Master
the Essential
Industry Skills
, Valuation - correct answer Process of determining the "right" value of a business, several approaches used,
q q q q q q q q q q q q q q q q
influenced by objectives of those doing the valuation q q q q q q q
How do you value a company? - correct answer There are a number of ways, mainly fall under two categories:
q q q q q q q q q q q q q q q q q q q q
1. Intrinsic Valuation - based on ability of company to generate cash flows. DCF is most common type of
q q q q q q q q q q q q q q q q q q q
intrinsic valuation - looks at company's cash flow forecasts and risks.
q q q q q q q q q q q
-Discounted Cash flow: value a company by looking at the future cash flows it can generate and discount them
q q q q q q q q q q q q q q q q q q q
to the present to arrive at a present value of your business
q q q q q q q q q q q
2. Relative Valuation - looks at multiples of comparable companies and applies mean/median multiple from
q q q q q q q q q q q q q q q
peer group. Can be multiples of current market values (trading comps) or historical acquisition multiples (deal
q q q q q q q q q q q q q q q
comps)
q
-Comparable company analysis: value a company by finding similar companies that are public and have
q q q q q q q q q q q q q q q
readily observable market prices.
q q q
-Comparable (precedent) transactions analysis: value a company by looking at the amount buyers have paid
q q q q q q q q q q q q q q q
for acquiring similar companies in the recent past
q q q q q q q
How do you value a company when not using DCF or relative valuation? - correct answer 1. Leveraged Buyout
q q q q q q q q q q q q q q q q q q q
Analysis: a specific type of valuation approach that looks at the value of a company to new acquirers under a
q q q q q q q q q q q q q q q q q q q q
highly leveraged scenario with specific return requirements. Hybrid of DCF and comps valuation.
q q q q q q q q q q q q
2. Liquidation (Bankruptcy) Analysis: value a company under a worst case liquidation scenario.
q q q q q q q q q q q q
What's the difference between equity and enterprise value? - correct answer Equity Value: the value of a
q q q q q q q q q q q q q q q q q
business to its owners. q q q
=(Operating Assets - Operating Liabilities) + (Cash - Debt) q q q q q q q q
-Cash: includes cash as well as nonoperating assets like marketable securities, short term investments, equity
q q q q q q q q q q q q q q q
investments
-Debt: includes straight debt (loans, revolver, bonds) as well as debt-like investments like capital leases, non-
q q q q q q q q q q q q q q q
controlling interests, preferred stock q q q
=Enterprise value - net debt q q q q
