Trading Comps Modeling | Wall Street Prep Exam |
Complete Questions & Answers | Latest 2026/2027 | 100%
Verified Complete Exam Study Guide – Actual Questions
with Bold Answers & Italic Explanations
This comprehensive document contains actual questions and verified answers from the Wall
Street Prep (WSP) Trading Comps Modeling Exam, updated for the latest 2026/2027
academic year. Each question includes the correct answer in bold with an italic
explanation based on WSP course materials and professional valuation standards .
SECTION 1: FUNDAMENTALS OF TRADING COMPS (Questions 1–15)
1. Comparable company analysis (trading comps) is used to estimate a company's
value based on:
A) Its historical financial statements
B) Real estate assets
C) Metrics of similar publicly traded peers
D) Discounted cash flows only
Answer: C
Trading comps is a relative valuation method that values a company by comparing its
financial metrics to those of similar publicly traded companies. The assumption is that
similar companies should trade at similar multiples .
2. A key output of trading comps is:
A) Internal rate of return
B) Relative valuation multiples
,C) Tax schedules
D) Fixed asset depreciation
Answer: B
The primary output of trading comps is a range of valuation multiples (EV/EBITDA, P/E,
EV/Revenue) derived from peer companies, which are then applied to the target company's
financial metrics .
3. When selecting trading comps, you generally choose companies with:
A) Similar capital structure and size
B) Identical stock prices
C) Different industries
D) No comparable metrics
Answer: A
Effective comparables should have similar operational characteristics (industry, products,
markets), financial characteristics (size, leverage, margins), and growth prospects to ensure
meaningful valuation comparisons .
4. Enterprise Value (EV) includes:
A) Equity value only
B) Equity value + debt − cash
C) Net income
D) Dividends
Answer: B
Enterprise Value represents the total value of a company's operations, including both equity
and debt, minus cash. The formula is EV = Market Capitalization + Total Debt - Cash and
Cash Equivalents .
,5. Equity Value is also referred to as:
A) Market Cap
B) Book Value
C) Debt Value
D) EBITDA
Answer: A
Equity value is the value attributable to common shareholders, calculated as share price
multiplied by diluted shares outstanding. This is commonly called market capitalization .
6. The most commonly used profit metric in trading comps is:
A) Revenue
B) Gross Margin
C) EBITDA
D) Net Income
Answer: C
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the most
widely used profit metric in trading comps because it is capital structure neutral and
removes the effects of non-cash expenses .
7. A high EV/EBITDA multiple generally implies:
A) Lower relative valuation
B) Higher relative valuation
C) No relationship to valuation
D) Below industry norms
Answer: B
, A higher EV/EBITDA multiple indicates that the market is valuing the company's earnings-
generating capacity more richly compared to peers. This may reflect higher growth
expectations or better margins .
8. A relative valuation outlier should be:
A) Included without review
B) Investigated and possibly excluded or explained
C) Used as the benchmark
D) Automatically discarded with no analysis
Answer: B
Outliers in valuation multiples should be investigated to understand why they differ. Possible
reasons include unique business models, recent acquisitions, or financial distress. They
may be excluded from the median/mean calculation if justifiable .
9. Price-to-Sales (P/S) multiple is most useful for:
A) Profitable companies only
B) Companies with unreliable earnings
C) Utility companies only
D) Banking sector only
Answer: B
P/S multiples are particularly useful for valuing companies with negative earnings or
EBITDA, where traditional profit-based multiples cannot be applied. Revenue is less
susceptible to accounting manipulation than earnings .
10. Dividend Yield is expressed as:
A) Annual dividends / stock price
B) Net income / equity
Complete Questions & Answers | Latest 2026/2027 | 100%
Verified Complete Exam Study Guide – Actual Questions
with Bold Answers & Italic Explanations
This comprehensive document contains actual questions and verified answers from the Wall
Street Prep (WSP) Trading Comps Modeling Exam, updated for the latest 2026/2027
academic year. Each question includes the correct answer in bold with an italic
explanation based on WSP course materials and professional valuation standards .
SECTION 1: FUNDAMENTALS OF TRADING COMPS (Questions 1–15)
1. Comparable company analysis (trading comps) is used to estimate a company's
value based on:
A) Its historical financial statements
B) Real estate assets
C) Metrics of similar publicly traded peers
D) Discounted cash flows only
Answer: C
Trading comps is a relative valuation method that values a company by comparing its
financial metrics to those of similar publicly traded companies. The assumption is that
similar companies should trade at similar multiples .
2. A key output of trading comps is:
A) Internal rate of return
B) Relative valuation multiples
,C) Tax schedules
D) Fixed asset depreciation
Answer: B
The primary output of trading comps is a range of valuation multiples (EV/EBITDA, P/E,
EV/Revenue) derived from peer companies, which are then applied to the target company's
financial metrics .
3. When selecting trading comps, you generally choose companies with:
A) Similar capital structure and size
B) Identical stock prices
C) Different industries
D) No comparable metrics
Answer: A
Effective comparables should have similar operational characteristics (industry, products,
markets), financial characteristics (size, leverage, margins), and growth prospects to ensure
meaningful valuation comparisons .
4. Enterprise Value (EV) includes:
A) Equity value only
B) Equity value + debt − cash
C) Net income
D) Dividends
Answer: B
Enterprise Value represents the total value of a company's operations, including both equity
and debt, minus cash. The formula is EV = Market Capitalization + Total Debt - Cash and
Cash Equivalents .
,5. Equity Value is also referred to as:
A) Market Cap
B) Book Value
C) Debt Value
D) EBITDA
Answer: A
Equity value is the value attributable to common shareholders, calculated as share price
multiplied by diluted shares outstanding. This is commonly called market capitalization .
6. The most commonly used profit metric in trading comps is:
A) Revenue
B) Gross Margin
C) EBITDA
D) Net Income
Answer: C
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the most
widely used profit metric in trading comps because it is capital structure neutral and
removes the effects of non-cash expenses .
7. A high EV/EBITDA multiple generally implies:
A) Lower relative valuation
B) Higher relative valuation
C) No relationship to valuation
D) Below industry norms
Answer: B
, A higher EV/EBITDA multiple indicates that the market is valuing the company's earnings-
generating capacity more richly compared to peers. This may reflect higher growth
expectations or better margins .
8. A relative valuation outlier should be:
A) Included without review
B) Investigated and possibly excluded or explained
C) Used as the benchmark
D) Automatically discarded with no analysis
Answer: B
Outliers in valuation multiples should be investigated to understand why they differ. Possible
reasons include unique business models, recent acquisitions, or financial distress. They
may be excluded from the median/mean calculation if justifiable .
9. Price-to-Sales (P/S) multiple is most useful for:
A) Profitable companies only
B) Companies with unreliable earnings
C) Utility companies only
D) Banking sector only
Answer: B
P/S multiples are particularly useful for valuing companies with negative earnings or
EBITDA, where traditional profit-based multiples cannot be applied. Revenue is less
susceptible to accounting manipulation than earnings .
10. Dividend Yield is expressed as:
A) Annual dividends / stock price
B) Net income / equity
