Guggenheim Prep

Question 1

Why might EBITDA be negative?

Answer 1

Low revenue, seasonality business, large one-time charge or write off, legal settlement.

Question 2

What is an LBO?

Answer 2

Lowest value the current owner will accept for their business.

LBO is a strategy used primarily by private equity firms to acquire companies by leveraging debt to enhance potential returns.

Question 3

Walk me through the impact of $100 cash purchase of inventory on all 3 statements

Answer 3

Income Statement: -NC-

Cash Flow statement:
Cash outflow from operating activities, -$100

Balance Sheet:
Increase inventory by $100
Decrease in cash by $100
No net effect on the assets side.

Question 4

What are the common valuation methods?

Answer 4

DCF, comparable companies, precedent transactions

Question 5

You can only choose one, what statement would you look at?

Answer 5

CFS

Question 6

You can look at two, what statement would you look at?

Answer 6

Income Statement & Balance Sheet

Question 7

How do we get EBITDA from Revenue?

Answer 7

Net Income + Interest Expense + Taxes + Depreciation Expense + Amortization

Question 8

What is EBITDA?

Answer 8

Metric used to assess a company’s operating performance by focusing on its earnings generated from core business operations