Questions
Q1.Valuation methods
1. Absolute Valuation Models
Discounted Cash Flow models or Present Value Models
Dividend discount models
Free cash flow to equity
Used when
1. The company does not pay dividends
2. pays dividends much different than its capacity to pay
3. When you assume it to be possible acquisition target and would like to
know how much the acquirer should pay
Free cash flow to the firm
Residual income
Asset-based models
2. Relative Valuation Models
Q2 What is regression
Q3 What are contingent liabilities
Q4 What is difference detween financial and operating lease
Vast majority are operating leases. An operating lease is treated like
renting -payments are considered operational expenses and the
asset being leased stays off the balance sheet. Lessee pays only the
monthly lease payment in operating lease.
In contrast, a capital lease is more like a loan; the asset is treated as
being owned by the lessee so it stays on the balance sheet. In
financial lease, lessee bears insurance, maintenance and taxes and
has right to purchase the asset at the end of the lease.
Q5 IRR , Disadvantages of IRR
Q6 If WC increase , how does it impact prepaid exp
If wc increases that means there is decrease in current assetsu
Q7 Minority interest- where does minorities interest come :
under p/l or balance sheet
A minority interest, which is also referred to as noncontrolling
interest (NCI), is ownership of less than 50% of a company's equity
by an investor or another company.
Minority interest shows up as a noncurrent liability on the balance
sheet of companies with a majority interest in a company,
representing the proportion of its subsidiaries owned by minority
shareholders.
Also, minority interest is reported on the consolidated income
statement as a share of profit belonging to minority shareholders.
In accounting terms, if a company owns a minority interest in
another company but only has a minority passive position, for
example it is unable to exert influence holding only less than 20% of
the subsidiary's voting stock, then only dividends received from the
minority interest are recorded from this investment. This is referred
to as the cost method; the ownership stake is treated as an
investment at cost and any dividends received are treated as
dividend income.
The alternative accounting method for a minority interest is referred
to as the equity method, where the company has a minority active
position, such as being able to exert influence by having greater
than 20% but less than 50% of the voting shares. Both dividends
and a percent of income are recorded on the company's books.
Dividends are treated as a return of capital, decreasing the value of
the investment on the balance sheet. The percentage of income the
minority interest is entitled to from the company is added to the
investment account on the balance sheet as it effectively increases
its equity share in the company
Q8 Working capital requirements of both companies
Q9 What is FCFF
FCFF is the cash flow available to the company’s suppliers of capital
after all operating expenses (including taxes) have been paid and
necessary investments in working capital (e.g., inventory) and fixed
capital (e.g., equipment) have been made. (EQUITY+ DEBT+ PREF
SH)
FCFE is the cash flow available to the company’s equity
shareholders after all operating expenses, interest, and principal
payments have been made and necessary investments in working
and fixed capital have been made. (ONLY EQUITY)
Q10 What is consumer surplus
Q11 Diff between balance sheet of service sector co. and
manufacturing co.
Q12 How would buying a machinary affect the balance sheet
Purchases on Cash - no effect
(same increase in long term assets and decrease in current
assets)
Purchase on Credit – Increases
(Assets increase and liabilities also increase by same
proportion)
Q13 Diff between forward and future market
Q14 Dead weight loss
Q15 Reason of negative WC
Q16 Forecast of capital expenditure
Q17 Demand – Elastic, Inelastic and Cross elasticity
Q18 Dividend payout and dividend yeild
Q19 EPS
Q20 Diff beta and alpha
Q21 PE ratio
Q22 Diff between ammortization ,impairment,depriciation
As with any other asset, there is an estimated lifespan and, thus,
depreciation in value over time. Amortization is used to reflect the
reduction in value of an intangible asset over its lifespan.
Impairment occurs when an intangible asset is deemed less
valuable than is stated on the balance sheet after amortization.
Q23 Diff between stock splits and bonus shares
Q24 Enterprise value
Q25 Leverage
Q26 NPA
Q27 SLR
Q28 Head of income tax
Q30 WC and cash flow statement and there relevance
Q31 How can you differentiate between WC and cash flow
Q32 Bonus and EPS
Q33 Goodwill evaluation techniques
Q34 CAPM model
Q35 How to calculate return in the CAPM model
Q36 Income statemnent where gross profit can be less than
net profit
Q37 Letter of credit
Q38 Equity dilution
Q39 Impact of equity dillusion on balance sheet
Q40 Can a loss making co. declare dividend
Q41 Components of shareholders funds
Q42 Equity or capital : Which cost is higher?
Q43 Numerical on EPS & DPS
Q44 How do you calculate growth rate in DCF method
Q45 Risk premium
Q46 Inelastic Supply
Q47 Enterprise Value
Q48 Divident Yield
Q49 Treasury Stock
Q50 Market Capitalization
Q51 Cheapest source of finance out of debt, equity and
preference
Q52 Can cost of equity be more than cost of debt
Q53 Impact on currency when countries issue new bonds
Q54 How to calculate returns on mutual funds
Q55 Can cost of equity be less than risk free rate
Q56 Dividend Payout Ratio
Q57 Working Capital
Q58 Bills Payable
Q59) Quick Ratio
Q60 Interest Coverage Ratio
Q61 What is current asset ,fixed asset
Q62 Relative valuation and how we do it ?
Q63 Is WACC less than cost of equity
Q64 In which situation will cost of debt be more than cost of
equity
Q65 Illustration on bonus issue, right issue and stock split
Q66 What is contra-asset?
Q67 Why do you deduct cash from enterprise value?
Q68 How do you account for tax sheild in cost of capital?
Q69 How do you decide share buyback price?
Q70 What is free float?
Q71 Who are the selling shareholders in IPO?
Q72 Deferred tax liability
Q73 How do you calculate cost of capital?
Q74 Three exceptions to law of demand
Q75 Any latest merger that you know about
Q76 Accrued expenses
Q77 DSCR
Q78 Dividend yeild and dividend payout
Q79 How will you show Goodwill in Balance sheet?
Q80 MM theory
Q81
Q82
Q83
Q84
Q85
Q86
Q87
Q88
Q89
Q90
