Practice Test Geeks(CPT) Certified Pro Trader Practice Test
← All CPT Flashcard Decks

Fundamental Analysis & Valuation Flashcards

7 cards from real CPT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Fundamental Analysis & Valuation flashcards as text

  1. A company has an EV/EBITDA of 6x while its industry peers average 10x. What does this most likely suggest?

    Answer: The company may be undervalued or facing operational challenges

    A below-average EV/EBITDA multiple can signal undervaluation or reflect concerns such as slower growth, higher risk, or deteriorating fundamentals.

  2. Which component of the DuPont analysis measures how efficiently a company uses its assets to generate sales?

    Answer: Asset turnover

    Asset turnover (Sales / Total Assets) is the DuPont component that reflects operational efficiency in using assets to produce revenue.

  3. When performing a DCF valuation, the terminal value typically represents what proportion of total estimated value for a mature company?

    Answer: 60–80%

    For most mature companies, terminal value accounts for 60–80% of total DCF value, making terminal growth rate assumptions critically important.

  4. A stock trades at a P/B ratio of 0.7. Which interpretation is most accurate?

    Answer: The market values the stock below its net asset value

    A P/B ratio below 1.0 means the stock is priced below the company's net book value, often seen in distressed sectors or when assets are overstated.

  5. Which earnings metric best adjusts for differences in capital structure when comparing companies across an industry?

    Answer: EBIT (Earnings Before Interest and Taxes)

    EBIT excludes interest expense, making it capital-structure neutral and suitable for comparing operating performance across companies with different debt levels.

  6. In a comparable company analysis (comps), which multiple is most useful when comparing companies with different depreciation policies?

    Answer: EV/EBITDA

    EV/EBITDA adds back depreciation and amortization, neutralizing the impact of varying depreciation policies and making cross-company comparisons more meaningful.

  7. A company's free cash flow yield is 8% while its P/E-based earnings yield is only 4%. What might explain this gap?

    Answer: The company has significant non-cash charges reducing reported earnings

    Large non-cash charges like depreciation and amortization reduce net income but not cash flow, so FCF yield can substantially exceed earnings yield for capital-intensive firms.