CFM Valuation Methods & DCF Modeling Flashcards
6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFM Valuation Methods & DCF Modeling flashcards as text
Which approach calculates equity value by subtracting net debt from enterprise value?
Answer: Bridge from EV to equity value
The EV-to-equity bridge adjusts enterprise value by subtracting debt and adding cash to arrive at the value attributable to equity holders.
In a leveraged buyout (LBO) context, what does the 'entry multiple' refer to?
Answer: The EV/EBITDA multiple paid by the sponsor to acquire the target
The entry multiple is the EV/EBITDA paid at acquisition and is a key driver of LBO returns along with exit multiple and leverage.
When building a three-statement model, which statement is completed last because it depends on both the income statement and balance sheet?
Answer: Cash Flow Statement
The cash flow statement is derived from changes in balance sheet accounts and net income, so it is built after the income statement and balance sheet are complete.
A company trades at a P/E of 15x and has EPS of $4.00. If EPS grows to $5.00 and the multiple remains constant, what is the new implied share price?
Answer: $75
New share price = P/E × new EPS = 15 × $5.00 = $75.
What is the primary purpose of normalizing EBITDA before applying a valuation multiple?
Answer: To remove one-time, non-recurring items so EBITDA reflects ongoing earning power
Normalizing EBITDA strips out non-recurring charges (restructuring, litigation) so the multiple is applied to a sustainable earnings base.
Which of the following best describes a 'football field' chart in investment banking presentations?
Answer: A horizontal bar chart displaying valuation ranges across multiple methodologies
A football field chart is a horizontal bar chart that overlays valuation ranges from different methods (DCF, Comps, Precedents) to show the overall valuation spectrum.