DCF Cheat Sheet 2026

The 30 highest-yield DCF facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Why is it important to use net debt (not gross debt) when bridging from enterprise value to equity value? → Cash can immediately be used to repay debt, so it offsets the debt obligation
2. What does 'capital structure' refer to in corporate finance? → The mix of debt and equity financing a company uses to fund its assets
3. What is the primary objective of dcf fundamentals in Discounted Cash Flow? → To ensure competence and proficiency in core dcf fundamentals concepts
4. In DCF, what is the relationship between standards and advanced concepts? → Standards provide the framework and benchmarks that guide professional practice
5. In Discounted Cash Flow, why is discount rate knowledge important for professional certification? → It demonstrates competence and ensures practitioners meet established standards
6. A company has an enterprise value of $500M, total debt of $120M, and cash of $20M. What is its equity value? → $400M
7. What is the primary objective of discount rate in Discounted Cash Flow? → To ensure competence and proficiency in core discount rate concepts
8. In DCF analysis, what is the relationship between enterprise value (EV) and equity value? → Equity Value = Enterprise Value − Net Debt (total debt minus cash)
9. In Discounted Cash Flow, what is the purpose of baseline assessment? → To establish a starting point for measuring future progress
10. A company's DCF valuation drops by 15% when WACC rises from 9% to 10%. What does this tell the analyst? → The model is highly sensitive to the discount rate
11. What is the fundamental accounting equation? → Assets = Liabilities + Equity
12. What is a best practice in Discounted Cash Flow discount rate? → A method or technique recognized as superior based on evidence and expert consensus
13. In Discounted Cash Flow, what does "resolution" refer to in digital design? → The number of pixels per unit of measurement, determining image clarity
14. Which theory of capital structure states that firms balance the tax shield benefits of debt against the costs of financial distress? → The trade-off theory
15. Why is interdisciplinary collaboration important in DCF applied practice? → It brings diverse perspectives that enhance problem-solving and outcomes
16. If you increase the WACC in a DCF model while holding all else constant, what happens to the implied share price? → It decreases
17. Are excellent examples of pure discount loans. The principal amount is repaid at some future date, without any periodic interest payments. → Treasury Bills
18. What is the primary objective of weighted average cost of capital in Discounted Cash Flow? → To ensure competence and proficiency in core weighted average cost of capital concepts
19. In Discounted Cash Flow, what does the term "net present value" (NPV) represent? → The difference between the present value of cash inflows and outflows over time
20. What does validity mean in the context of assessment within Discounted Cash Flow? → The assessment measures what it is intended to measure
21. In the WACC formula, what weights should be used for the debt and equity components? → Market values of debt and equity, not book values
22. What is a rubric used for in Discounted Cash Flow assessment? → To define criteria and performance levels for evaluating work quality
23. How does continuous improvement apply to DCF applied practice? → Through regular evaluation of practices and implementation of evidence-based updates
24. Beginning Balance x Interest Rate → Formulas for Amortization Table: Interest Paid
25. Formulas for Amortization Table: Principal Payment → Total Annual Payment - Interest Paid
26. In a leveraged buyout (LBO) DCF context, why does higher leverage typically increase equity value even if EV stays the same? → It does not; higher leverage reduces equity value because net debt increases
27. In Discounted Cash Flow, what is the purpose of an internal audit? → To evaluate and improve risk management, control, and governance processes
28. What is the primary purpose of a sensitivity analysis in a DCF model? → To show how changes in key assumptions affect valuation
29. In Discounted Cash Flow, what is the primary purpose of formative assessment? → To monitor progress and provide feedback during the learning or development process
30. What is the purpose of financial reconciliation in Discounted Cash Flow? → To verify that financial records match and identify any discrepancies