Questions

Q1.Valuation methods

1. Absolute Valuation Models

 Discounted Cash Flow models or Present Value Models

 Dividend discount models

 Free cash flow to equity

Used when

1. The company does not pay dividends

2. pays dividends much different than its capacity to pay

3. When you assume it to be possible acquisition target and would like to

know how much the acquirer should pay

 Free cash flow to the firm

 Residual income

 Asset-based models

2. Relative Valuation Models

Q2 What is regression

Q3 What are contingent liabilities

Q4 What is difference detween financial and operating lease

Vast majority are operating leases. An operating lease is treated like

renting -payments are considered operational expenses and the
asset being leased stays off the balance sheet. Lessee pays only the
monthly lease payment in operating lease.

In contrast, a capital lease is more like a loan; the asset is treated as

being owned by the lessee so it stays on the balance sheet. In
financial lease, lessee bears insurance, maintenance and taxes and
has right to purchase the asset at the end of the lease.

Q5 IRR , Disadvantages of IRR

Q6 If WC increase , how does it impact prepaid exp

If wc increases that means there is decrease in current assetsu
Q7 Minority interest- where does minorities interest come :
under p/l or balance sheet

A minority interest, which is also referred to as noncontrolling

interest (NCI), is ownership of less than 50% of a company's equity
by an investor or another company.
Minority interest shows up as a noncurrent liability on the balance
sheet of companies with a majority interest in a company,
representing the proportion of its subsidiaries owned by minority
shareholders.
Also, minority interest is reported on the consolidated income
statement as a share of profit belonging to minority shareholders.

In accounting terms, if a company owns a minority interest in

another company but only has a minority passive position, for
example it is unable to exert influence holding only less than 20% of
the subsidiary's voting stock, then only dividends received from the
minority interest are recorded from this investment. This is referred
to as the cost method; the ownership stake is treated as an
investment at cost and any dividends received are treated as
dividend income.

The alternative accounting method for a minority interest is referred

to as the equity method, where the company has a minority active
position, such as being able to exert influence by having greater
than 20% but less than 50% of the voting shares. Both dividends
and a percent of income are recorded on the company's books.
Dividends are treated as a return of capital, decreasing the value of
the investment on the balance sheet. The percentage of income the
minority interest is entitled to from the company is added to the
investment account on the balance sheet as it effectively increases
its equity share in the company

Q8 Working capital requirements of both companies

Q9 What is FCFF

FCFF is the cash flow available to the company’s suppliers of capital

after all operating expenses (including taxes) have been paid and
necessary investments in working capital (e.g., inventory) and fixed
capital (e.g., equipment) have been made. (EQUITY+ DEBT+ PREF
SH)

FCFE is the cash flow available to the company’s equity

shareholders after all operating expenses, interest, and principal
payments have been made and necessary investments in working
and fixed capital have been made. (ONLY EQUITY)
Q10 What is consumer surplus

Q11 Diff between balance sheet of service sector co. and

manufacturing co.

Q12 How would buying a machinary affect the balance sheet

Purchases on Cash - no effect

(same increase in long term assets and decrease in current
assets)

Purchase on Credit – Increases

(Assets increase and liabilities also increase by same
proportion)

Q13 Diff between forward and future market

Q14 Dead weight loss

Q15 Reason of negative WC

Q16 Forecast of capital expenditure

Q17 Demand – Elastic, Inelastic and Cross elasticity

Q18 Dividend payout and dividend yeild

Q19 EPS

Q20 Diff beta and alpha

Q21 PE ratio

Q22 Diff between ammortization ,impairment,depriciation

As with any other asset, there is an estimated lifespan and, thus,

depreciation in value over time. Amortization is used to reflect the
reduction in value of an intangible asset over its lifespan.
Impairment occurs when an intangible asset is deemed less
valuable than is stated on the balance sheet after amortization.

Q23 Diff between stock splits and bonus shares

Q24 Enterprise value

Q25 Leverage

Q26 NPA
Q27 SLR

Q28 Head of income tax

Q30 WC and cash flow statement and there relevance

Q31 How can you differentiate between WC and cash flow

Q32 Bonus and EPS

Q33 Goodwill evaluation techniques

Q34 CAPM model

Q35 How to calculate return in the CAPM model

Q36 Income statemnent where gross profit can be less than

net profit

Q37 Letter of credit

Q38 Equity dilution

Q39 Impact of equity dillusion on balance sheet

Q40 Can a loss making co. declare dividend

Q41 Components of shareholders funds

Q42 Equity or capital : Which cost is higher?

Q43 Numerical on EPS & DPS

Q44 How do you calculate growth rate in DCF method

Q45 Risk premium

Q46 Inelastic Supply

Q47 Enterprise Value

Q48 Divident Yield

Q49 Treasury Stock

Q50 Market Capitalization

Q51 Cheapest source of finance out of debt, equity and

preference
Q52 Can cost of equity be more than cost of debt

Q53 Impact on currency when countries issue new bonds

Q54 How to calculate returns on mutual funds

Q55 Can cost of equity be less than risk free rate

Q56 Dividend Payout Ratio

Q57 Working Capital

Q58 Bills Payable

Q59) Quick Ratio

Q60 Interest Coverage Ratio

Q61 What is current asset ,fixed asset

Q62 Relative valuation and how we do it ?

Q63 Is WACC less than cost of equity

Q64 In which situation will cost of debt be more than cost of

equity

Q65 Illustration on bonus issue, right issue and stock split

Q66 What is contra-asset?

Q67 Why do you deduct cash from enterprise value?

Q68 How do you account for tax sheild in cost of capital?

Q69 How do you decide share buyback price?

Q70 What is free float?

Q71 Who are the selling shareholders in IPO?

Q72 Deferred tax liability

Q73 How do you calculate cost of capital?

Q74 Three exceptions to law of demand

Q75 Any latest merger that you know about
Q76 Accrued expenses

Q77 DSCR

Q78 Dividend yeild and dividend payout

Q79 How will you show Goodwill in Balance sheet?

Q80 MM theory
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