Compounding Quality Pieter Slegers
Compounding Quality Pieter Slegers
1. How do you value a company?
Valuation methods include Discounted Cash Flow
(DCF), Comparable Company Analysis, and
Precedent Transactions.
2. Explain the concept of free cash flow.
Free Cash Flow = Operating Cash Flow – Capital
Expenditures; it shows how much cash a
company generates after investments.
3. What is EBITDA, and why is it important?
EBITDA = Earnings before Interest, Taxes,
Depreciation, and Amortization; it measures core
operating performance.
4. How do you determine the cost of equity?
Using the CAPM formula: Cost of Equity = RiskFree Rate + Beta Equity Risk Premium.
5. What is the purpose of financial forecasting?
To estimate future revenue, costs, and
profitability for planning and budgeting.
6. How do interest rates affect financial
markets?
Higher rates increase borrowing costs and reduce
spending; lower rates do the opposite
Compounding Quality Pieter Slegers
7. How do you analyze a company's capital
structure?
By examining the mix of debt and equity and
assessing leverage ratios like Debt/Equity.
8. What is the role of a financial analyst in a
company?
They evaluate financial data to support decisions
on budgeting, investments, and forecasting.
9. How does inflation impact financial decisionmaking?
It erodes purchasing power, affects pricing,
interest rates, and cost structures.
10. What is the CAPM model, and how is it used
in finance?
It calculates expected return on equity using
market risk; key in valuing investments.
11. What is the difference between accounting
and finance?
Accounting records and reports past transactions;
finance focuses on planning future financial
strategies.
Compounding Quality Pieter Slegers
12. What are financial ratios, and how do you
analyze them?
They assess performance, liquidity, and
profitability using formulas like ROE, Current
Ratio, etc.
13. How would you assess the financial health
of a company?
By analyzing financial statements, ratios, cash
flow, and profitability trends.
14. How do you calculate and interpret the
break-even point?
Break-even = Fixed Costs / (Price - Variable Cost);
shows when a business starts making profit.
15. Explain the difference between a merger
and an acquisition.
A merger combines two companies as equals; an
acquisition is when one company buys another.
16. Can a company be profitable and still have
cash flow issues?
Yes, due to timing differences between revenue
and cash collection or heavy investments
Compounding Quality Pieter Slegers
17. What are the differences between public
and private equity?
Public equity is traded on stock markets; private
equity is ownership in non-listed companies.
18. What is the difference between fixed costs
and variable costs?
Fixed costs don't change with output (e.g. rent);
variable costs rise with production (e.g.
materials).
19. What is a discounted cash flow (DCF) and
why is it important?
DCF values a company by projecting future cash
flows and discounting them to present value.
20. What is working capital, and why is it
important for a company?
Working Capital = Current Assets - Current
Liabilities; it measures short-term liquidity.
21. What are derivatives, and how are they
used in financial markets?
Financial contracts based on underlying assets;
used for hedging or speculation.
Compounding Quality Pieter Slegers
22. How do you calculate WACC (Weighted
Average Cost of Capital)?
WACC = Weighted cost of equity + Weighted cost
of debt (1 - tax rate).
23. What are the risks of debt financing
compared to equity financing?
Debt increases fixed obligations and bankruptcy
risk; equity dilutes ownership but is less risky.
24. What is sensitivity analysis, and why is it
important in financial modeling?
It tests how changes in inputs affect outcomes;
helps understand risks and key drivers.
25. What are the major types of financial
models used in corporate finance?
DCF model, LBO model, M&A model, 3-statement
model, and Budgeting models.
26. What is the difference between an income
statement and a balance sheet?
Income statement shows profitability over time;
balance sheet shows financial position at a point
in time.
Compounding Quality Pieter Slegers
27. What are the three main financial
statements, and how are they connected?
Income Statement, Balance Sheet, and Cash Flow
Statement; net income links all three.
28. What is the difference between short-term
and long-term financial planning?
Short-term focuses on operations and liquidity;
long-term covers strategy and capital
investments.
29. What is the difference between short-term
and long-term financial planning?
Short-term focuses on operations and liquidity;
long-term covers strategy and capital
investments.
30. How would you handle financial data for a
company with fluctuating revenues?
Use rolling forecasts, scenario analysis, and build
flexible budgets to adapt quickly.
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Pieter Slegers
Compounding Quality