When an LBO sponsor wishes to exit its investment in 5 years, one way to find th
ID: 2419437 • Letter: W
Question
When an LBO sponsor wishes to exit its investment in 5 years, one way to find the equity value of a company at the LBO sponsor’s exit year is to:
a.Use an Enterprise Value/Sales multiple to find Enterprise Value and then subtract net debt
b.Use an Enterprise Value/EBITDA multiple to find Enterprise Value and then subtract net debt
c.Use a Price/Earnings multiple to find Equity Value
d.All of the above
2.
While equity contribution went as low as the single digits in the 1980’s, the current split between equity and debt in an LBO deal is best characterized as:
a.Equity – 10%; Debt 90%
b.Equity – 90%; Debt 10%
c.Equity – 65%; Debt 35%
d.Equity – 35%; Debt 65%
A company has the following information:
2014 Revenues of $5 billion
2013 Accounts receivable of $400 million
2014 Accounts receivable of $600 million
What are the days sales outstanding (DSO) for this company?
a.29.2 days
b.36.5 days
c.44 days
d.60 days
A company has the following information:
2014 Revenues of $8 billion
2014 COGS of $5 billion
2013 Accounts receivable of $400 million
2014 Accounts receivable of $600 million
2013 Inventories of $1 billion
2014 Inventories of $800 million
2013 Accounts payable of $250 million
2014 Accounts payable of $300 million
What are the inventory days for the company?
a.58.4 days
b.65.7 days
c.70 days
d.73 days
Explanation / Answer
Average accounts receivables = $400 million + $ 600 million)/2 = $ 500 million
Days sales outstanding = Average accounts receivables * 365/Sales
= 500 million * 365/5,000 million
= 36.5 days
Therefore, option b is correct.
Average inventory = $1,00 million + $ 800 million)/2 = $900 million
Inventory days for the company = Average inventory* 365/ Cost of goods sold
= $900 million * 365/$5,000 million
= 65.7 days
Therefore, option b is correct.
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