CFC Financial Analysis and Valuation 3

Question 1

A CFC calculates a client's business has an EV/EBITDA multiple of 6x. If EBITDA is $2 million, the implied enterprise value is:

Accepted Answer

$12 million

Answer

$3 million

Answer

$8 million

Answer

$2 million

Question 2

Which valuation method is typically most appropriate for capital-intensive industries like utilities or real estate?

Accepted Answer

Asset-based (net asset value) approach

Answer

Price-to-earnings multiple

Answer

Revenue multiple

Answer

Discounted dividend model

Question 3

A sensitivity analysis in financial modeling tests how the output value changes when:

Accepted Answer

One or more key assumptions are varied systematically

Answer

Historical data is restated

Answer

The discount rate is fixed at zero

Answer

All inputs are held constant

Question 4

Return on equity (ROE) can be decomposed using the DuPont framework into:

Accepted Answer

Net profit margin × asset turnover × equity multiplier

Answer

Revenue growth, margin expansion, and tax rate

Answer

Gross margin, EBIT margin, and net margin

Answer

Dividend yield, P/E ratio, and price-to-book

Question 5

When a CFC values a privately held business for a buy-sell agreement, a 'discount for lack of marketability' (DLOM) is applied because:

Accepted Answer

Private company shares cannot be quickly sold in a liquid public market

Answer

The business has negative earnings

Answer

The owner is under age 50

Answer

The business has high debt

Question 6

Which financial metric best measures management's efficiency at generating profit from total assets regardless of capital structure?

Accepted Answer

Return on assets (ROA)

Answer

Return on equity (ROE)

Answer

Earnings per share (EPS)

Answer

Price-to-earnings ratio