Business & Marketing
Business Valuation Quiz: Test DCF, Comparables, and Cash Flow
This Business Valuation Quiz helps you apply DCF, comparables, and cash flow basics to estimate a company's worth. Get instant answers, see explanations, and spot gaps before interviews or exams. For broader practice, try our corporate finance quiz, a financial management quiz, or a business finance assessment.
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1What does DCF stand for in valuation?
2Which valuation method uses multiples from similar companies?
3Enterprise value equals equity value plus which of the following?
4EBITDA excludes which of the following?
5Which rate is commonly used to discount a firm's free cash flows?
6Which cash flow is used to determine enterprise value in a DCF?
7If a company has an EBIT of $10 million and an EV/EBIT multiple of 8x, its enterprise value is:
8What is the primary purpose of performing sensitivity analysis in a DCF model?
9In relative valuation, the P/E ratio compares which of the following?
10How are capital expenditures treated when calculating free cash flow?
11Which assumption is typically used for the terminal growth rate in a DCF model?
12If a company increases its financial leverage, what typically happens to its levered beta?
13What does beta measure in the CAPM framework?
14What does the EV/EBITDA multiple represent?
15An increase in net working capital has what effect on free cash flow?
16Given a capital structure of 60% equity at 10% cost and 40% debt at 5% after-tax cost, what is the WACC?
17According to the Hamada equation, how is levered beta ([@U00CE][@U00B2]L) calculated from unlevered beta ([@U00CE][@U00B2]U), debt (D), equity (E), and tax rate (T)?
18Under IFRS 16, how should operating leases be treated in free cash flow calculations?
19When valuing a firm in a high-risk country, which adjustment should be made to the discount rate?
20In a DCF model using the Gordon Growth method for terminal value, which formula is correct?
Learning Goals
Learning Outcomes
- Analyse key valuation methods such as DCF and comparables
- Evaluate financial metrics to determine enterprise value
- Identify factors affecting market and intrinsic value
- Apply valuation models to real-world business scenarios
- Demonstrate insight into adjusting cash flows and discount rates
Study Guide
Cheat Sheet
- Discounted Cash Flow (DCF) Method - Imagine time-traveling with your dollars! DCF brings future free cash flows back to today's value using an appropriate discount rate, so you know what tomorrow's profits are really worth right now. Master projecting cash flows and picking the right rate for a blockbuster valuation. Discounted Cash Flow
- Comparables (Comps) Method - Think of valuing a company like comparing superhero stats - match financial metrics to similar businesses using P/E or EV/EBITDA ratios. By selecting peers with similar growth and revenue drivers, you'll benchmark value like a pro analyst. It's relative valuation made fun and insightful. Valuation Using Multiples
- Enterprise Value (EV) - EV is the all-in one price tag of a company, adding debt, equity, and subtracting cash. It gives you the full takeover cost, not just the market cap. Use it to compare apples-to-apples across businesses of different capital structures. Enterprise Value
- Weighted Average Cost of Capital (WACC) - Picture a smoothie blending debt and equity costs - WACC is that blended rate, reflecting how much it really costs to fund a business. It serves as the discount rate in DCF, making sure future cash flows are risk-adjusted. Nail WACC and your valuations stay on target. Weighted Average Cost of Capital
- Terminal Value - Your DCF model's grand finale, capturing value beyond the forecast period. Choose between the perpetuity growth method or exit multiple method to estimate this "everlasting" slice of value. Terminal Value often drives most of your valuation, so treat it like the star of the show. Terminal Value
- Normalized Earnings - One-off events can skew your view, so strip out unusual gains or losses to reveal sustainable profits. Normalizing earnings is like cleaning your glasses before analyzing financial performance. This gives you a clearer picture of what the company consistently generates year after year. Normalized Earnings
- Market Analysis - Dive into economic trends, industry shifts, and investor sentiment to see how external forces shape valuations. Think of it as gathering market gossip - knowing the buzz helps you adjust your models for real-world twists. Stay up to date and your valuations will stay sharp. Market Analysis
- Comparable Company Analysis - Handpick a squad of companies with similar size, growth rates, and operational traits to boost your Comps accuracy. By matching apples to apples, your P/E or EV/EBITDA multiples become much more meaningful. Precision in your peer group selection is the secret sauce. Comparable Company Analysis
- Valuation Limitations - No method is perfect: DCF relies on projections and assumptions, while Comps depend on peer quality. Be aware of biases and uncertainties to critically review your results. Understanding these pitfalls turns you into a savvy valuation detective. Valuation Limitations
- Case Study Practice - Level up by applying valuation models to real-world scenarios - practice with case studies to test your skills under different business contexts. The more hands-on examples you solve, the more intuitive your financial wizardry becomes. Ready to impress on exam day? Case Study
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Updated Feb 21, 2026