top of page

What are some of the common errors made by analysts when valuing a company using DCF❓

All the students who took our 8 weeks training program, 90% of them found internships and jobs. Please click here https://www.cityinvestmenttraining.com/ to learn more.


Check our popular ebook "Top 100 Investment Banking Questions with Answers".

Click here to get your copy: https://www.cityinvestmenttraining.com/blog


Fancy answering this real-life investment banking interview question on DCF❓


What are some of the common errors made by analysts when valuing a company using DCF❓


We continue our series of how to answer DCF based valuation questions in investment banking interviews.


One of the most oft-repeated mistakes that new analysts make when valuing companies using DCF is computing FCFF incorrectly.


🚀 FCFF = CFO + CFI


CFO typically includes NOPAT + D&A + Changes in working Capital + Interest expense + Changes in DTA/DTL


The biggest snag with analysts when computing FCFF is that they use the CFO template from companies without making finer adjustments to arrive at FCFF.


So what's the hack that smart analysts use to ensure accuracy of underlying FCFF❓


Bankers need to make sure that they calculate FCFF on the cash flow statement for the past two historical years from which forecasted FCFF can be anchored ⚓.


Most analysts will never bother collating historical cash flow numbers but it remains key to ensure the accuracy of the base from which forecasted FCFF is computed.



-----



Want to learn more about Financial Modelling?


We are offering a Live Online 2-day course (worth £1,000) on Financial Modelling for Free to all students and recent graduates who..


✅ Like,

✅ Share,

✅ Comment on this post and

✅ Follow us on LinkedIn.


The course is free for students who want to attend the course and get a participation certificate.


Once you have Liked, Shared, Commented and Followed me on LinkedIn please send your CV to..


👉 info@cityinvestmenttraining.com with subject "2 Days Course"


🗓 Date: 4th and 5th of March 2023




80 views0 comments
bottom of page