Corporate finance exam questions

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Corporate finance exam questions

Used when firm uses higher than normal amount of debt to finance purchase of a company, then uses company's cash flows to pay off debt over time. The acquisiton's assets may be used as collateral.

Ideally, the acquisitions debt has been partially retired at time of exit. Walk me through a DCF? Find and predict FCFs during modeling period. The final cash flow in year N will be equal to the sum of the terminal value calculation and the final year's FCF.

What is WACC and how do you calculate it? Weighted Average Cost of Capital. It reflects the cost of the company raising new capital and reflects the riskiness of a company.

The reason we project out free cash flows for the DCF is because the FCF is the amount of actual cash that could be hypothetically be paid out to debt and equity holders from a company.

Corporate finance exam questions

Beta is a measure of the volatility of an investment compared with the market as a whole. The market has a beta of 1, while investments that are more volatile than the market have a beta greater than 1 and those that are less volatile have a beta less than 1. These advanced finance Corporate finance exam questions require deeper thinking and understanding of corporate finance.

How does a ten dollar increase in depreciation expense affect each of the three financial statements? Then go to cash flows.

Corporate finance exam questions

This equals an increase by 4. By unlevering beta you remove the financial effects of debt in the capital structure. This will show you the risk of a firm's equity compared to the market. Also when you have a company that is not on the market and doesn't have a beta, you can take a company on the market that is similar and unlever its beta as a proxy for the unlisted company's beta.

What is the difference between cash-base accounting and accrual? Cash based accounting recognizes sales and expenses when cash actually flows out of the company. Accrual based accounting recognizes revenues and expenses as they are incurred regardless of whether cash flows out of the company at that exact time.

Accrual based accounting is the more popular method. How is it possible for a company to have positive net income but go bankrupt? If working capital erodes such as increasing accounts receivable, lowering accounts payableit is possible.

Also, financial fraud can also be a possibility. What are the major factors that drive mergers and acquisitions? To achieve synergies cost savings Diversify or sharpen the focus, market, or products of the company Gain new technologies Eliminate a competitor from the market or grow market share Increase Supply-Chain Pricing Power by buying a supplier or distributor Improve financial metrics and numbers If you were Chief Financial Officer CFO of a Fortune company, what would be your concerns?

Explain from a high-level what the long-term financial implications are for your company. Highlight different things on each of the three statements: Make sure your behavioral stories are planned out, and practiced but don't sound too rehearsed! Practice answering finance technical questions on the fly, perhaps some Mock Interviews with Experienced Wall St.

Mentors to really get yourself in the zone. Common Finance Interview Questions At the very least, review the most common finance questions and answers above at least a few times before your first interview. Nowadays, however, that really isn't enough to set yourself apart from the competition.

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Remember, at the end of the day - it'll be you, your preparation, and your confidence that will win you the interview. Set yourself up to acing the interview and landing that dream offer! Background vector created by Brgfx - Freepik.

This content was originally created by member WallStreetOasis.In this free accounting course, learn about the income statement, balance sheet & cash flow statement.

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