AGC technical test

Question 1

what is the square root of 0.9?

Answer 1

0.95

Question 2

what is the formula and definition for gross revenue churn?

Answer 2

(downsells + churn) / starting total revenue

percentage of recurring revenue a company lost from cancellations, non-renewals, or contractions (i.e. downgrade to a lower-tier account) in a specific period

Question 3

what is revenue chrun?

Answer 3

percentage of recurring revenue that a company lost due to customer cancellations, non-renewals, and account downgrades in a given period

Question 4

net MRR churn =

Answer 4

= (churned MRR - expansion MRR) / beginning MRR

Question 5

expansion MRR

Answer 5

upselling, cross-selling, and price increases

Question 6

churned MRR

Answer 6

cancellations, non-renewals, and account downgrades

Question 7

MRR

Answer 7

the proportion of a company’s total revenue per month that is considered predictable due to being contractual (subscription)

Question 8

net revenue chrun

Answer 8

gross revenue churn net of expansion revenue

Question 9

upselling

Answer 9

tactics to derive more incremental revenue from existing customers by offering incentives, such as upgrades to higher tier plans

Question 10

cross-selling

Answer 10

encouraging existing customers to purchase complimentary products or services that enhance the original purchase

Question 11

CAPM

Answer 11

Rf + B(Rm - Rf)

Question 12

A customer pays on the first day of the calendar year in advance for a 12 month subscription to ABC Application Software. The annual subscription costs the customer $1,200,000. How much revenue has been recognized YTD and what is the deferred revenue balanced on March 1st?

Answer 12

$200,000 revenue, $1,000,000 deferred revenue

Question 13

My commissions are 1% of renewal bookings. I have $15M of maintenance revenue that renews 75% and $5M of Sass revenue at 90%. What are my total commissions?

Answer 13

$157,500

Question 14

I have 200 options that start vesting on 10/1/2018. The options accelerate given the option agreement. The options have a 4 year, 1 years cliff vesting schedule. Todays date is 10/2/2019 How many options have vested?

Answer 14

50

Question 15

vesting

Answer 15

process of gaining full legal rights to something

Question 16

There are 100 options that start vesting on 10/1/2018. there are also 100 options that start vesting on 10/1/2017. Both that a 4 year, 1 years cliff vesting schedule. Today’s date is 10/2/2019. How many options have vested?

Answer 16

150

Question 17

In case you have the change to evaluate the financial viability of the company which statement would you chose?

Answer 17

cash flow statement

Question 18

what is WACC

Answer 18

firm’s average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt

KeE/(D+E)] + [KdD/(D+E)

Question 19

capitalizing employee labor costs will likely flow through which expense line item at a later date?

Answer 19

depreciation bc they are being removed from the IS and being capitalized to the BS

Question 20

ABC Application Software billed $2,000,000 in February for services it rendered in February. The customer paid the bill in full on March 20th. On march 15th how much total revenue has been recognized YTD and what is the AR balance associated with the Bill?

Answer 20

$2,000,000 Revenue, $2,000,000 AR

Question 21

What is the correct formula for calculation of simple interest?

Answer 21

P x r x t

Question 22

A company is generating $10M EBITDA at exit with an exit multiple of 15x. There is a 15% management rollover ownership. Initial sponsor equity was 35M. What is my CoC return?

Answer 22

2.6x

[150 - (35+22.5)] / 35

Question 23

I have 200 options with a strike price of $0.10. The common price per share is $1.00. What is the total execution cost of the options?

Answer 23

20

Question 24

when finding a comparable company, which of these things would you not include?

Answer 24

of customers

Question 25

what is the formula for LTV?

Answer 25

Avg ARR / gross revenue churn

Question 26

I have starting shareholders equity of $8.1M. Management is rolling $5.158M, and sponsor is putting in $17.465M of equity. What is the new shareholders equity?

Answer 26

$8.1M

Question 27

I am buying a company for 7x revenue. Revenue is $20M. I have a 2x revenue term loan, and management is rolling $20M. There are $10M of transaction expenses. What is my sponsor equity?

Answer 27

$80M

Question 28

How do you unlever Beta?

Answer 28

B(L) / [1 + (1-t) x D/E]

Question 29

What line item creates circularity in a 3-statement LBO?

Answer 29

interest expense