depa

Question 1

question

Answer 1

answer

Question 2

The sum of a corporation’s long term debt, stock and retained earnings.

Answer 2

Capitalization

Question 3

The conversion of future income into a present value by use of a capitalization factor usually expressed as a percentage such as return on investment (ROI).

Answer 3

Capitalization (of a business)

Question 4

The percentage rate used to determine the present value of a stream of future earnings. The rate is a subjective rate dependent upon the perceived risk associated with the business

Answer 4

Capitalization rate

Question 5

Purchase of a controlling interest of a company’s stock.

Answer 5

Buyout

Question 6

A method of analyzing the value of a firm by reviewing similar recent transactions in the industry.

Answer 6

Comparables Analysis

Question 7

The interest rate of borrowing for a firm’s debt and equity. The more risky a firm appears to investors, the higher the cost of capital.

Answer 7

Cost of Capital

Question 8

A contingent payment for a business normally tied to future company performance. Performance is typically measured against sales or profits and payment is made once the measure is meets or exceeds a set figure.

Answer 8

Earn-out

Question 9

____ is often used as a quick measure of operating cash flow.

Answer 9

EBITDA

Question 10

Cash available for distribution after taxes but before the effects of financing. Calculated as net income plus depreciation less expenditures required for working capital and capital items adjusted to remove effects of financing.

Answer 10

Free cash flow

Question 11

The amount by which the price paid for a company exceeds the company’s estimated net worth at market value of the underlying assets and liabilities.

Answer 11

Goodwill

Question 12

The purchase of a company that is financed primarily by debt.

Answer 12

Leveraged Buyout

Question 13

The value of a company based on the market value of its assets, net of liabilities.

Answer 13

Liquidating Value

Question 14

Loans that are generally subordinate to senior secured debt but are superior to claims on equity. Normally the terms involve interest-only payments and warrants.

Answer 14

Mezzanine Financing

Question 15

Cash available for distribution after taxes and after the effects of financing. Calculated as net income plus depreciation less expenditures required for working capital and capital items.

Answer 15

Net Cash Flow

Question 16

A written publication describing a company in detail including its past financial history and future projections prepared for the purpose of selling that firm to potential buyers.

Answer 16

Offering Memorandum

Question 17

Hypothetical financial statements as they would appear if some event, such as increased sales or production, were to occur.

Answer 17

Pro Forma Statements

Question 18

A sale transaction in which an owner(s) sells part of the equity of the business in order to take “some chips off the table,” while still operting the business. The recap can entail a sale of any amount of company stock but most involve change of control.

Answer 18

Recap

Question 19

A process that reconstructs earnings by “adding back” certain unusual or excess expenses to determine the “true” earnings of a private company. Examples include owner compensation above market salaries and bonuses, owner perks, one-time expenses and other discretionary expenses. Recasting allows meaningful comparisons with other investment

Answer 19

Recasting

Question 20

Net profits kept to accumulate in a business after dividends are paid.

Answer 20

Retained Earnings

Question 21

The estimated market value of a company at the end of certain number of years, usually four to five years.

Answer 21

Residual Value

Question 22

A measure of a company’s profitability, equal to a year’s earnings divided by its total assets, expressed as a percentage.

Answer 22

Return on Assets

Question 23

A source of funding that looks to take an equity position with a firm at an early stage of the company’s development. The VC will most often like to invest in companies that show promise toward becoming public companies within 5 to 7 years of their investment.

Answer 23

Venture Capital

Question 24

S.T.E.P. stands for …

Answer 24

Spiritual, Things, Experiences, People

Question 25

difference between the cost and benefit, multiplied by your EBITDA multiple is the ___

Answer 25

Incremental Value

Question 26

Businesses should be revalued at least ___.

Answer 26

annually

Question 27

Value acceleration is achieved by focusing on the ___, which is largely based on the strength of your ___.

Answer 27

multiple, intangible assets

Question 28

__ is accomplished by raising both the multiple & EBITDA, which leads to exponential growth.

Answer 28

Accelerated Value

Question 29

A larger company tends to trade at a __ multiple than a smaller company.

Answer 29

higher

Question 30

If TTM Recasted Sales = 100; EBITDA % to sales = 12%; then, recasted EBITDA = ?

Answer 30

12

Question 31

If TTM Recastes Sales = 100 & Sales Multiplier = 2, Value = ?

Answer 31

200

Question 32

If your value using EBITDA is less than your value using sales, it tends to indicate that you are __ financially compared to similar companies in your industry.

Answer 32

underperforming

Question 33

If best in class EBITDA to sales is 10%; your TTM Sales are $500, and your Recasted TTM EBITDA is 200… your Best in Class calculation for the Profit Gap =

Answer 33

50

Question 34

If best-in-class recasted EBITDA is 100 the best-in-class multiple is 5; Actual Sales(multiple) Value is 200 and Actual EBITDA(multiple) value is 400 (making the average 300), value gap = ?

Answer 34

500-300=200

Question 35

Starting at Visions 3 years out, then you will move to themes at 1 year out, followed by…

Answer 35

Vision (3 yr) Themes (1 yr) Projects (90 days) Tasks (<90 days) Milestones (30 days)Deliverables

Question 36

Order of priorities based on time vs value?

Answer 36

Derisking; Strategy; Efficiency; Growth; Culture

Question 37

What is the deliverable from Workshop 4 (Alignment)?

Answer 37

Opportunity Assessment