IB Questions Help
How would a change in LIFO/FIFO flow through the financial statements?
What are the drawbacks of using WACC in valuing companies? (What can I use other than WACC?)
Trending Content - Investment Banking Forum
| +267 | Return Rates For Interns Are Falling? | 107 | 7m |
| +111 | I am a drunk MD AMA | 39 | 1d |
| +109 | Article: Why UBS's Asian M&A bankers are thriving and UBS's American M&A bankers are not | 10 | 1h |
| +64 | VP Lifestyle at Top BB Coverage Groups | 40 | 1d |
| +62 | UBS Offer Day | 23 | 16h |
| +57 | An Outsider’s View of RX Banking Out of College | 6 | 4d |
| +40 | WF Return offers | 27 | 11h |
| +39 | I hate Wells Fargo | 6 | 12h |
| +34 | No return offer - feeling like a failure is an understatement | 14 | 18h |
| +30 | Weird Majors->IB ? | 24 | 1d |
Career Resources
If you change to LIFO from FIFO, you are recognizing the most recent inventory purchases in the COGS expense. Inventory will be reduced on the BS, COGS increased on the IS. Higher expense = understated net income and EPS = lower tax expense. The tax break results in an increased cash flow. A company would want to use LIFO inventory accounting to lower taxes and increase CFs, albeit while taking a hit on the bottom.
Anyone please correct me if I missed anything.
You don't value a company using WACC, you can discount their FCF at WACC (DCF). If you are valuing a company that is solely comprised of equity, rather than with debt and equity, you can use Ke (Cost of equity) as the discount rate. You can derive Ke using CAPM. You can use IRR to value a company. One drawback of WACC is that it doesn't account for flexibility and in this case you can use a real options valuation to value a project or a co. You won't use real options in IB, but just another options. For IB and IB interviews (at least what I have seen, only a SA), knowing WACC is fine.
Veniam consequatur cumque sit ipsam enim exercitationem ea corporis. Nemo adipisci non deserunt autem.
Et earum quo deleniti sunt rerum. Est est ut fugit quam porro molestiae exercitationem.
Quia tempora in quia sunt distinctio qui culpa. Quasi totam cumque est omnis et. Mollitia autem rem ipsam aspernatur quia. Architecto qui voluptate repudiandae aut nisi nobis beatae quo. Cupiditate quam ullam veniam nobis ea unde quia non. Vero eum non qui in illo velit.
Sunt blanditiis quaerat non ut cum sed repudiandae. A sunt qui animi sit temporibus molestiae quia in. Ipsa molestiae dicta blanditiis ab. Et aut sed at nisi et. Velit animi omnis quia eos amet fugiat. Consequatur vel et adipisci nobis. Veniam cupiditate ut consectetur nostrum quod tempore laborum vitae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...