Investment Banking Technicals
Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is investment banking primarily focused on?
✔✔ Advising companies on raising capital and executing strategic transactions
What is equity financing?
✔✔ Raising money by selling ownership shares in a company
What is debt financing?
✔✔ Raising money by borrowing funds that must be repaid with interest
What is an IPO?
✔✔ The first sale of a company’s shares to the public
What does underwriting mean in investment banking?
✔✔ The bank guarantees capital by buying securities and reselling them
What is a secondary offering?
✔✔ A sale of additional shares after a company is already public
What is a valuation?
1
,✔✔ The process of estimating a company’s worth
What are the three main valuation methods?
✔✔ Comparable Companies, Precedent Transactions, and DCF
What does DCF stand for?
✔✔ Discounted Cash Flow
What is the main idea behind a DCF valuation?
✔✔ A company’s value equals the present value of its future cash flows
What is free cash flow?
✔✔ Cash generated after operating expenses and capital expenditures
Why do we discount cash flows in a DCF?
✔✔ Money today is worth more than money in the future
What is WACC?
✔✔ Weighted Average Cost of Capital
What does WACC represent?
✔✔ The average cost of funding from debt and equity
2
,Why is WACC used as the discount rate?
✔✔ It reflects the risk of the company’s cash flows
What increases WACC?
✔✔ Higher business or financial risk
What is terminal value?
✔✔ The value of a company beyond the forecast period
What are two common ways to calculate terminal value?
✔✔ Perpetuity growth method and exit multiple method
What is EBITDA?
✔✔ Earnings before interest, taxes, depreciation, and amortization
Why is EBITDA commonly used?
✔✔ It approximates operating cash flow
What is enterprise value?
✔✔ The value of the entire business including debt
3
, How do you calculate enterprise value?
✔✔ Market value of equity plus net debt
What is equity value?
✔✔ The value attributable to shareholders
How do enterprise value and equity value differ?
✔✔ Enterprise value includes debt while equity value does not
What is net debt?
✔✔ Total debt minus cash and cash equivalents
Why do we use EV/EBITDA multiples?
✔✔ They allow comparison across firms with different capital structures
What is a comparable company analysis?
✔✔ Valuing a company using multiples from similar public companies
What is a precedent transaction analysis?
✔✔ Valuing a company based on prices paid in past acquisitions
Why are precedent transaction multiples often higher?
4
Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is investment banking primarily focused on?
✔✔ Advising companies on raising capital and executing strategic transactions
What is equity financing?
✔✔ Raising money by selling ownership shares in a company
What is debt financing?
✔✔ Raising money by borrowing funds that must be repaid with interest
What is an IPO?
✔✔ The first sale of a company’s shares to the public
What does underwriting mean in investment banking?
✔✔ The bank guarantees capital by buying securities and reselling them
What is a secondary offering?
✔✔ A sale of additional shares after a company is already public
What is a valuation?
1
,✔✔ The process of estimating a company’s worth
What are the three main valuation methods?
✔✔ Comparable Companies, Precedent Transactions, and DCF
What does DCF stand for?
✔✔ Discounted Cash Flow
What is the main idea behind a DCF valuation?
✔✔ A company’s value equals the present value of its future cash flows
What is free cash flow?
✔✔ Cash generated after operating expenses and capital expenditures
Why do we discount cash flows in a DCF?
✔✔ Money today is worth more than money in the future
What is WACC?
✔✔ Weighted Average Cost of Capital
What does WACC represent?
✔✔ The average cost of funding from debt and equity
2
,Why is WACC used as the discount rate?
✔✔ It reflects the risk of the company’s cash flows
What increases WACC?
✔✔ Higher business or financial risk
What is terminal value?
✔✔ The value of a company beyond the forecast period
What are two common ways to calculate terminal value?
✔✔ Perpetuity growth method and exit multiple method
What is EBITDA?
✔✔ Earnings before interest, taxes, depreciation, and amortization
Why is EBITDA commonly used?
✔✔ It approximates operating cash flow
What is enterprise value?
✔✔ The value of the entire business including debt
3
, How do you calculate enterprise value?
✔✔ Market value of equity plus net debt
What is equity value?
✔✔ The value attributable to shareholders
How do enterprise value and equity value differ?
✔✔ Enterprise value includes debt while equity value does not
What is net debt?
✔✔ Total debt minus cash and cash equivalents
Why do we use EV/EBITDA multiples?
✔✔ They allow comparison across firms with different capital structures
What is a comparable company analysis?
✔✔ Valuing a company using multiples from similar public companies
What is a precedent transaction analysis?
✔✔ Valuing a company based on prices paid in past acquisitions
Why are precedent transaction multiples often higher?
4
