AIFA Quantitative Methods & Financial Modeling Flashcards
6 cards from real AIFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AIFA Quantitative Methods & Financial Modeling flashcards as text
A company's EBITDA is $5 million and its total enterprise value is $30 million. What is the EV/EBITDA multiple?
Answer: 6.0x
EV/EBITDA = $30M / $5M = 6.0x, a common valuation multiple used to compare companies across capital structures.
In regression analysis, what does the R-squared (R²) value represent?
Answer: The proportion of variance in the dependent variable explained by the independent variable(s)
R² measures the goodness of fit, indicating what percentage of the variance in the dependent variable is explained by the model's independent variables.
What is the primary purpose of sensitivity analysis in financial modeling?
Answer: To test how changes in key assumptions affect the model output
Sensitivity analysis reveals how changes in key inputs (e.g., revenue growth, discount rate) affect model outputs such as valuation or NPV.
A project has an NPV of $0 when discounted at 12%. What does this tell you about the project's internal rate of return (IRR)?
Answer: The IRR equals 12%
By definition, the IRR is the discount rate at which NPV equals zero; therefore, if NPV = $0 at 12%, the IRR is exactly 12%.
Which valuation approach determines value by analyzing the prices paid for comparable companies in recent merger and acquisition transactions?
Answer: Precedent transaction analysis
Precedent transaction analysis values a company based on multiples paid in historical M&A deals for similar businesses, reflecting acquisition premiums.
Which type of financial ratio measures how quickly a company converts its assets into revenue?
Answer: Activity (efficiency) ratio
Activity ratios such as asset turnover measure how efficiently a company uses its assets to generate sales revenue.