Other interview Questions

Question 1

What is EBITDA a proxy for?

Answer 1

Its a proxy for cash flow (cash flow from operations according to sum)

Question 2

Would you rather have $1 of EBITDA, or debt paydown?

Answer 2

Almost always EBITDA. Can be used for more stuff and increases TEV with multiple.

Question 3

how does a intereat rate change impact the DCF?

Answer 3

it impacts NOPAT
Impacts Cost of debt

Question 4

If you only having one metric to asses the business?

Answer 4

1. Definitely Free cash flow
2. EBITDA is ok, but you miss, tax (country specific) interest (financing structure) and D&A (investment structure) (for majority investments)
3. Net income not best, since discrepancy of working capital , D&A and Capex (work for minority investments)

Question 5

What drives multiples (like P/E)

Answer 5

high expected growth of revenue and margins
Good previous performance -> Good cash flows
Strong moats
Strong management
Industry trends
Market conditions and cost of capital

Question 6

What is the Rule of 72?

Answer 6

Formula used to calculate how long it will take for an investment to double in value: Take 72/x = y%IRR
- e.g. double over five years 72/5 = ~14%IRR

Question 7

what is a buy-and-build strategy? And what’s the rationale?

Answer 7

build a platform through acquisition

Rationale:
1. Synergies, cost synergies, overlapping cost, COGS, revenue synergies, cross-selling to customers
2. Multiple arbitrage, playing on fact due to larger to sell at higher multiples. More stable and strong.