WALL STREET PREP PREMIUM EXAMT
g g g g g
RANSACTION COMPS MODELING WAL g g g
L STREET PREP EXAM VERIFIEDGRAD
g g g g g
ED A+||g
Whatgisggenerallygnotgconsideredgtogbegagpre-taxgnon-
recurringg(unusualgorginfrequent)gitem?g (correctganswer)gExtraordinaryggains/losses
whatgisgfalsegaboutgdepreciationgandgamortizationg (correctganswer)gD&Agmaygbegclassifie
dgwithinginterestgexpense
CompanygX'sgcurrentgassetsgincreasedgbyg$40gmilliongfromg2007-
2008gwhilegthegcompaniesgcurrentgliabilitiesgincreasedgbyg$25gmilliongovergthegsamegperio
d.gthegcashgimpactgofgthegchangegingworkinggcapitalgwasg (correctganswer)gagdecreasegofg1
5gmillion
thegfinalgcomponentgofgangearningsgprojectiongmodelgisgcalculatingginterestgexpense.gthegc
alculationgmaygcreategagcirculargreferencegbecauseg(correctganswer)ginterestgexpensegaffe
ctsgnetgincome,gwhichgaffectsgFCF,gwhichgaffectsgthegamountgofgdebtgagcompanygpaysgdo
wn,gwhich,gingturngaffectsgtheginterestgexpense,ghencegthegcirculargreference
ag10-
qgfinancialgfilingghasgallgofgthegfollowinggcharacteristicsgexceptg (correctganswer)gissuedgf
ourgtimesgagyear.
DepreciationgExpensegfoundgingthegSG&Aglinegofgthegincomegstatementgforgagmanufactu
ringgfirmgwouldgmostglikelygbegattributablegtogwhichgofgthegfollowingg (correctganswer)gco
mputersgusedgbygthegaccountinggdepartment
Ifgagcompanyghasgprojectedgrevenuesgofg$10gbillion,gaggrossgprofitgmargingofg65%,gandgpro
jectedgSG&Agexpensesgofg$2billion,gwhatgisgthegcompany'sgoperatingg(EBIT)gmargin?g(corr
ectganswer)g45%
Agcompanyghasgthegfollowingginformation,g1.g2014grevenuesgofg$5gbillion,2013gAccountsgr
eceivablegofg$400gmillion,g2014gaccountsgreceivablegofg$600gmillion,gwhatgaregthegdaysgs
alesgoutstandingg(correctganswer)g36.5
Agcompanyghasgthegfollowingginformation:
• g2014gRevenuesgofg$8gbillion
• g2014gCOGSgofg$5gbillion
• g2013gAccountsgreceivablegofg$400gmillion
• g2014gAccountsgreceivablegofg$600gmillion
, • g2013gInventoriesgofg$1gbillion
• g2014gInventoriesgofg$800gmillion
• g2013gAccountsgpayablegofg$250gmillion
• g2014gAccountsgpayablegofg$300gmillion
Whatgaregtheginventorygdaysgforgthegcompany?g (correctganswer)g65.7gdays
Whichgofgthegfollowinggisgtrueg (correctganswer)gCocagCola'sgbrandgnamegisgnotgreflectedga
sgangintangiblegassetgongitsgbalancegsheet
Agcompanyghasgthegfollowingginformation:
• g2014gsharegrepurchasegplangofg$4gbillion
• gAveragegsharegpricegofg$60gforgthegyearg2013
• gExpectedgEPSggrowthgforg2014gofg10%
Whatgshouldgthegnumbergofgsharesgrepurchasedgbygthegcompanygbegingyourgfinancialgmod
el?g (correctganswer)g60.6gmillion
non-
controllingginterestg (correctganswer)gisgangexpensegongthegincomegstatementgandgequitygog
thegbalancegsheet
Agcompanyghasgthegfollowingginformation:
• g2013gretainedgearningsgbalancegofg$12gbillion
• gNetgincomegofg$3.5gbillionging2014
• gCapexgofg$200gmillionging2014
• gPreferredgdividendsgofg$100gmillionging2014
• gCommongdividendsgofg$400gmillionging2014
Whatgisgthegretainedgearningsgbalancegatgthegendgofg2014?g (correctganswer)g15gbillion
ingordergtogfindgoutghowgmuchgcashgisgavailablegtogpaygdowngshortgtermgdebt,gsuchgasgrevo
lvinggcreditgline,gyougmustgtakeg(correctganswer)gbeginninggcashgbalanceg+gpre-
debtgcashgflowsg-gmin.gcashgbalanceg-grequiredgprincipalgpaymentsgofgLTgandgothergdebt
togcalculateginterestgexpensegingthegfuture,gyougshouldgdogwhichgofgthegfollowingg(correctga
nswer)gapplygagweightedgaverageginterestgrategtimesgthegaveragegdebtgbalancegovergthegco
ursegofgthegyear
enterpriseg(transaction)gvaluegrepresentsgthe:g (correctganswer)gvaluegofgallgcapitalginveste
dgingagbusiness
Agdebtgholdergwouldgbegprimarilygconcernedgwithgwhichgofgthegfollowinggmultiples?gI.g
Enterpriseg(Transaction)gValueg/gEBITDA
II. Price/Earnings
III. Enterpriseg(Transaction)gValueg/gSalesg (correctganswer)g1gandg3gonly
OngJanuaryg1,g2014,gsharesgofgCompanygXgtradegatg$6.50gpergshare,gwithg400gmilliongshar
esgoutstanding.gThegcompanyghasgnetgdebtgofg$300gmillion.gAftergbuildinggan
g g g g g
RANSACTION COMPS MODELING WAL g g g
L STREET PREP EXAM VERIFIEDGRAD
g g g g g
ED A+||g
Whatgisggenerallygnotgconsideredgtogbegagpre-taxgnon-
recurringg(unusualgorginfrequent)gitem?g (correctganswer)gExtraordinaryggains/losses
whatgisgfalsegaboutgdepreciationgandgamortizationg (correctganswer)gD&Agmaygbegclassifie
dgwithinginterestgexpense
CompanygX'sgcurrentgassetsgincreasedgbyg$40gmilliongfromg2007-
2008gwhilegthegcompaniesgcurrentgliabilitiesgincreasedgbyg$25gmilliongovergthegsamegperio
d.gthegcashgimpactgofgthegchangegingworkinggcapitalgwasg (correctganswer)gagdecreasegofg1
5gmillion
thegfinalgcomponentgofgangearningsgprojectiongmodelgisgcalculatingginterestgexpense.gthegc
alculationgmaygcreategagcirculargreferencegbecauseg(correctganswer)ginterestgexpensegaffe
ctsgnetgincome,gwhichgaffectsgFCF,gwhichgaffectsgthegamountgofgdebtgagcompanygpaysgdo
wn,gwhich,gingturngaffectsgtheginterestgexpense,ghencegthegcirculargreference
ag10-
qgfinancialgfilingghasgallgofgthegfollowinggcharacteristicsgexceptg (correctganswer)gissuedgf
ourgtimesgagyear.
DepreciationgExpensegfoundgingthegSG&Aglinegofgthegincomegstatementgforgagmanufactu
ringgfirmgwouldgmostglikelygbegattributablegtogwhichgofgthegfollowingg (correctganswer)gco
mputersgusedgbygthegaccountinggdepartment
Ifgagcompanyghasgprojectedgrevenuesgofg$10gbillion,gaggrossgprofitgmargingofg65%,gandgpro
jectedgSG&Agexpensesgofg$2billion,gwhatgisgthegcompany'sgoperatingg(EBIT)gmargin?g(corr
ectganswer)g45%
Agcompanyghasgthegfollowingginformation,g1.g2014grevenuesgofg$5gbillion,2013gAccountsgr
eceivablegofg$400gmillion,g2014gaccountsgreceivablegofg$600gmillion,gwhatgaregthegdaysgs
alesgoutstandingg(correctganswer)g36.5
Agcompanyghasgthegfollowingginformation:
• g2014gRevenuesgofg$8gbillion
• g2014gCOGSgofg$5gbillion
• g2013gAccountsgreceivablegofg$400gmillion
• g2014gAccountsgreceivablegofg$600gmillion
, • g2013gInventoriesgofg$1gbillion
• g2014gInventoriesgofg$800gmillion
• g2013gAccountsgpayablegofg$250gmillion
• g2014gAccountsgpayablegofg$300gmillion
Whatgaregtheginventorygdaysgforgthegcompany?g (correctganswer)g65.7gdays
Whichgofgthegfollowinggisgtrueg (correctganswer)gCocagCola'sgbrandgnamegisgnotgreflectedga
sgangintangiblegassetgongitsgbalancegsheet
Agcompanyghasgthegfollowingginformation:
• g2014gsharegrepurchasegplangofg$4gbillion
• gAveragegsharegpricegofg$60gforgthegyearg2013
• gExpectedgEPSggrowthgforg2014gofg10%
Whatgshouldgthegnumbergofgsharesgrepurchasedgbygthegcompanygbegingyourgfinancialgmod
el?g (correctganswer)g60.6gmillion
non-
controllingginterestg (correctganswer)gisgangexpensegongthegincomegstatementgandgequitygog
thegbalancegsheet
Agcompanyghasgthegfollowingginformation:
• g2013gretainedgearningsgbalancegofg$12gbillion
• gNetgincomegofg$3.5gbillionging2014
• gCapexgofg$200gmillionging2014
• gPreferredgdividendsgofg$100gmillionging2014
• gCommongdividendsgofg$400gmillionging2014
Whatgisgthegretainedgearningsgbalancegatgthegendgofg2014?g (correctganswer)g15gbillion
ingordergtogfindgoutghowgmuchgcashgisgavailablegtogpaygdowngshortgtermgdebt,gsuchgasgrevo
lvinggcreditgline,gyougmustgtakeg(correctganswer)gbeginninggcashgbalanceg+gpre-
debtgcashgflowsg-gmin.gcashgbalanceg-grequiredgprincipalgpaymentsgofgLTgandgothergdebt
togcalculateginterestgexpensegingthegfuture,gyougshouldgdogwhichgofgthegfollowingg(correctga
nswer)gapplygagweightedgaverageginterestgrategtimesgthegaveragegdebtgbalancegovergthegco
ursegofgthegyear
enterpriseg(transaction)gvaluegrepresentsgthe:g (correctganswer)gvaluegofgallgcapitalginveste
dgingagbusiness
Agdebtgholdergwouldgbegprimarilygconcernedgwithgwhichgofgthegfollowinggmultiples?gI.g
Enterpriseg(Transaction)gValueg/gEBITDA
II. Price/Earnings
III. Enterpriseg(Transaction)gValueg/gSalesg (correctganswer)g1gandg3gonly
OngJanuaryg1,g2014,gsharesgofgCompanygXgtradegatg$6.50gpergshare,gwithg400gmilliongshar
esgoutstanding.gThegcompanyghasgnetgdebtgofg$300gmillion.gAftergbuildinggan
