Equity Research, Financial Modelling and Valuation - Interview Questions

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Can beta of a listed company be negative?

When is company valued using book value and when is enterprise value used?

ROCE vs ROIC

What is DCF? Explain steps for DCF?

What is relative valuation? Explain steps for RV?

Why 10-year Government Securities interest rate is considered as risk-free rate?

What valuation used for bank? Why?

What factors affects performance of retail industry company?

How do we calculate Rm (market return)?

Why we use BV but not EV for valuing a bank?

How will a company improvise its current ratio?

How to capture organic and inorganic growth in revenue estimate?

As an equity analyst which are the three most important ratios you have analysed to make a
buy/sell/hold recommendation?

What is difference between P/E and PEG ratio

Which ratios have you analysed to evaluate the liquidity position of the company to confirm that
the working capital is being managed efficiently?

How did you arrive at major assumptions which were considered during projecting revenue and
cost model of your company researched?

What are the major structural changes / developments which is likely to impact the industry
dynamics of the company / companies you have worked upon?

How are risk weighted assets calculated?

How did you assume the risk-free rate in calculating cost of equity in valuation process?

EV/Ton and NAV based valuation is used in which industry?

For which type of companies PEG ratio is used for relative valuation?

What do you understand by sum-of-the-parts valuation?

What is the difference between adjusted EPS and diluted EPS? Explain with example.

What is minority interest or non-controlling interest? And in which situation non-controlling


interest is added to the profit after tax of the company?
What is difference between working capital cycle and operating cycle?

What are the advantages and disadvantages of relative valuation?

If you wish to increase sales for a company, then how you will do it?

Explain deferred revenues giving examples of companies from manufacturing sector as well as
service industry

State 4 items from profit and loss account which are linked in cash flow statement

EV/EBITAX and EV/EBITAR valuation is used for which industries?

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