BIWS 400 Questions - All Technicals Questions and Answers | Latest Version | 2025/2026 | Correct & Verified

BIWS 400 Questions - All Technicals Questions and Answers | Latest Version | 2025/2026 | Correct & Verified What are the three main financial statements? Income Statement, Balance Sheet, and Cash Flow Statement What does the Income Statement measure? A company’s profitability over a period of time What does the Balance Sheet show? A company’s financial position at a specific point in time What does the Cash Flow Statement track? Cash inflows and outflows over a period What is the basic accounting equation? Assets = Liabilities + Equity What does EBITDA stand for? Earnings Before Interest, Taxes, Depreciation, and Amortization Why is EBITDA used in valuation? 2 It approximates operating cash flow and allows comparison across firms What is revenue? Total sales generated from business activities What is gross profit? Revenue minus cost of goods sold What is operating income? Profit after operating expenses but before interest and taxes What is net income? Profit after all expenses, interest, and taxes What is depreciation? Allocation of a tangible asset’s cost over its useful life What is amortization? Allocation of an intangible asset’s cost over time How does depreciation affect cash flow? It reduces taxable income but is a non-cash expense 3 What is working capital? Current assets minus current liabilities Why is working capital important? It measures short-term liquidity What increases working capital? Increase in current assets or decrease in current liabilities What is free cash flow to the firm (FCFF)? Cash flow available to all capital providers What is free cash flow to equity (FCFE)? Cash flow available to equity holders What is enterprise value? Value of a company’s operations available to all investors How do you calculate enterprise value? Equity value plus net debt and other claims 4 What is equity value? Value attributable to shareholders Why do we use enterprise value in valuation multiples? It reflects the value of the entire business What is a valuation multiple? A ratio comparing company value to a financial metric What is EV/EBITDA used for? Comparing company value relative to operating performance What is P/E ratio? Price per share divided by earnings per share When is P/E less useful? When earnings are negative or distorted What is a comparable company analysis? Valuation using similar publicly traded companies What is precedent transaction analysis? 5 Valuation based on past M&A transactions Why do precedent transactions show higher multiples? Because they include a control premium What is a discounted cash flow (DCF) analysis? Valuation based on present value of future cash flows What discount rate is used in a DCF? Weighted Average Cost of Capital (WACC) What does WACC represent? Average required return of debt and equity holders What increases WACC? Higher risk or higher cost of capital What is terminal value? Value of cash flows beyond the forecast period What are two common terminal value methods? Perpetuity growth and exit multiple 6 What is perpetuity growth rate? Assumed constant growth rate into the future Why must perpetuity growth be conservative?