Verity Knowledge Solutions Analyst Interview Questions and Answers

Beta is a measure of a stock's volatility in relation to the market. 0 beta means the stock's price is not affected by market movements. Negative beta means the stock moves opposite to the market.

• Beta measures a stock's volatility in relation to the market

• A beta of 1 means the stock moves in line with the market

• A beta of 0 means the stock's price is not affected by market movements

• A negative beta means the stock moves opposite to the market

• Beta is used to calculate the expect...read more

The 3 financial statements are the income statement, balance sheet, and cash flow statement.

• Income statement shows a company's revenues and expenses over a period of time.

• Balance sheet provides a snapshot of a company's financial position at a specific point in time.

• Cash flow statement shows how changes in balance sheet and income statement affect cash and cash equivalents.

Types of depreciation include straight-line, double declining balance, units of production, and sum-of-the-years-digits.

• Straight-line depreciation: Allocates an equal amount of depreciation expense each year.

• Double declining balance: Accelerates depreciation by applying a fixed rate to the book value of the asset.

• Units of production: Depreciation is based on the actual usage or production of the asset.

• Sum-of-the-years-digits: Accelerates depreciation with a declining fraction...read more

EPS stands for earnings per share, which is a company's profit divided by the number of outstanding shares. Diluted equity refers to the total value of a company's shares if all potential shares were converted into common stock.

• EPS is calculated by dividing a company's net income by the number of outstanding shares.

• Diluted equity takes into account potential shares that could be converted into common stock, such as stock options or convertible bonds.

• EPS is a key metric for in...read more

Balance sheet components include assets, liabilities, and equity.

• Assets: Resources owned by the company such as cash, inventory, and property.

• Liabilities: Debts and obligations owed by the company such as loans and accounts payable.

• Equity: Represents the owner's stake in the company's assets after deducting liabilities.

• Balance sheet equation: Assets = Liabilities + Equity.

Enterprise value is a measure of a company's total value, taking into account its market capitalization, debt, and cash.

• Enterprise value = Market capitalization + Total debt - Cash and cash equivalents

• It represents the total value of a company that would need to be paid by an acquirer in a takeover

• EV is used to compare companies with different capital structures or levels of debt

• It is a more comprehensive measure than market capitalization alone

FCFF is the cash flow available to all providers of capital, while FCFE is the cash flow available to equity shareholders.

• FCFF includes debt and equity holders, while FCFE only includes equity holders.

• FCFF is used to value the firm as a whole, while FCFE is used to value equity.

• FCFF is calculated as EBIT(1-Tax Rate) + Depreciation - Capex - Change in Working Capital, while FCFE is calculated as FCFF - Interest(1-Tax Rate) + Net Borrowing.

• Example: If a company has debt, FCFF w...read more