Financial Fees → Financing fees are related to raising debt or the issuance of equity and can be capitalized and amortized over the tenor of the debt (~5-7 years). Transaction…
PIK interest (“paid-in-kind”) is a form of non-cash interest, meaning the borrower compensates the lender in the form of additional debt as opposed to cash interest. PIK interest typically carries…
Industry Cyclicality: A potential LBO contender should produce steady cash flow. Therefore,from a risk perspective, an investment is less appealing when revenue and demand changes arevery cyclical and reliant on…
Leverage ratios link a company's debt holdings to a particular cash flow indicator, most frequently EBITDA. The financing climate and the industry will have a significant impact on the leverage…
A candidate for an LBO should possess the majority (or all) of the following qualities: A mature industry with a defendable market position, a business model with recurring revenue, a…
1) Deleveraging – As more loan principal is paid down with the help of the cash flows produced by the acquired company, the value of the equity held by the…
A PE firm will typically monetize their investment in one of the following ways: Sale to a Strategic Buyer: Sales to strategic buyers typically have higher valuations and are more…
Ans. A high percentage of borrowed money is typically used to finance an LBO, and the private equity sponsor contributes just a modest amount of equity to the deal. The…
Step 1 – Entry Valuation - Calculating the implied entry valuation based on the entry multiple and LTM EBITDA of the target firm is the first step in creating an…
An LBO is the purchase of a business, whether it is privately held or publicly listed, in which a sizeable portion of the purchase price is financed by debt. The…
A non-binding agreement that outlines the basic terms & conditions of an investment. It serves as a model for creating more comprehensive, binding documents.
Equity dilution is the reduction in shareholders' stock holdings in a firm. Whenever shareholders provide equity ownership to external investors (like private equity firms) in return of money, it is…
Pre- Money Valuation - Pre-money valuation is the value of a firm before any outside capital in most recent/proposed round of funding has been added. Pre-money is best defined as…
There are 8 Stages of funding given below: • Pre-seed funding stage • Seed funding stage • Series A funding • Series B funding • Series C funding • Series…
Capital invested in a business or other entity that is not publicly listed or traded is known as private equity.Private Equity investors prefer to invest in stable companies, whereas Venture…
Dry powder is the amount of committed but unallocated capital that a venture capital (VC) or private equity (PE) company has on hand. It is, in other words, a cash…
Strategic buyers must carefully analyse purchases based on how the targets will "tie in" with their existing company and business units since they frequently incorporate the acquired business into a…
A financial buyer is a type of acquirer in an M&A that is primarily interested in a buying the company with an intention to sell later at some point, thereby…
EXTRA- Few tips for Technical round of interviews in FP&A Since FP&A roles and responsibilities vary from industry to industry, students are advised to have a brief knowledge of the…
Professionals in a variety of businesses rely on financial modeling. Here are just a few examples: Bankers use it in sales and trading, equity research, and both commercial and investment…
A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor. It allows companies to make important decisions on whether or…
● A risk assessment is a systematic process that involves identifying, analyzing, and controlling hazards and risks. It is performed to determine which measures are, or should be, in place…
Matching concept states that expenses that are incurred in an accounting period should be matching with the revenue earned during that period. Thus, all expenses for that accounting period whether…
● Pivot Table is an interactive way to quickly summarize large amounts of data. It is used to summarize, sort, reorganize, and group. It allows us to extract the significance…
The main reason for the increase in accounts receivable is an increase in credit sales by the company.
Key ratios for measuring the profitability of the company are ● Return on Equity ● Gross Profit margin ● Net Profit margin ● Earnings per share
Some of the key ratios considered by investors while investing are: ● Price-to-Cash-Flow Ratio ● Debt-to-Equity Ratio ● Quick Ratio ● Price-to-Earnings Ratio
MIS reports focus on raw data, trends, patterns in that data, and comparisons with relevant past data. MIS reports are also an effective tool for managers to track business operations…
MIS stands for Management Information system. It can be described as a system that provides important information for the management of your company. MIS collaborates with people, technology, and business…
Costs and other expenses in a company can be forecasted by any of the following methods: ● Percentage of Revenues ● Costs other than depreciation as a percent of revenues…
The linkage of the 3 financial statements can be described as: ● Financing activities mostly affect the balance sheet and cash from finalizing, except for interest, which is shown on…
On the balance sheet, the asset account of inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense…
In Financial Planning & Analysis (FP&A), the practice of creating financial models is primarily for short to medium-term budgeting, forecasting, and planning at a corporation (or operating company). FP&A teams…
● Payback period: The payback period calculates the length of time required to recoup the original investment. Payback periods are typically used when liquidity presents a major concern. ● Internal…
● A rolling forecast is a report that uses historical data to predict future numbers and allows organizations to project future results for budgets, expenses, and other financial data based…
● Segmentation- Grouping of data having common attributes. Useful for areas like customer segmentation by customer type, geographical spread, etc. ● Data visualization- which includes graphical representation of the data…
Significant aspects to be kept in mind: ● Detailed information on the business of the company ● Major revenue sources ● Operational expenses ● Investments of the company ● Capital…
Have a brief knowledge of: ● Life stage of the company or its products/services ● Impact of government policies ● Recent project(s) launched by the company & its performance ●…
A general answer and a structured answer are given below - General Answer: Improving margins and profits is an important goal for any business, and there are several strategies that…
Variance commentaries can be on different aspects of a business such as: ● Costs ● Revenue ● Profit and Loss ● Expenses ● Efficiency In each of the above, the…
Driver-Based Planning is an approach in which the key business variables which drive a company’s success are identified and used to forecast where the company is heading, with the results…
Budget vs. actual: compares actual financial results to budgeted or planned results. Variance analysis: explains the difference between budgeted and actual results. Cash flow: tracks the inflow and outflow of…
● The compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming…
● Variance analysis is the actual difference between 2 data points. It is the process of examining each variance in detail and determining the reasons why the budget was not…