London EB Interview: 1hr DCF modelling test
I have a 1hr DCF modelling test tomorrow for an analyst role at an elite boutique in London. I can build a complete DCF within 50 minutes to a good standard, so I am relatively confident of my intrinsic modelling skills going in.
My main concern is the time it'll take to gather commercially reasonable assumptions (growth, margins, D&A % of capex etc.) from the information source they provide me with (I don't know what this is but assume it'll be broker notes).
I'd appreciate any last minute tips/recommendations you have from prior experience.
For a 50 minute test, I think it's fairly unlikely that you'll be provided with an Information Memorandum or anything particularly onerous. More likely, they'll provide some sort of briefing document that's maybe a couple of pages and might even state explicitly most of the assumptions.
It's possible that bits of the model will be pre-populated even. They'd rather test you on skills you'll need on the job (e.g. do you know how to un-lever and re-lever a beta).
That said, if I needed to give some tips, then:
What’s the rationale behind D&A being 4% of revenue?
Fair question (and apologies - it was meant as a throwaway example of the broader point but that wasn't clear) - I cover Consumer and usually it tends to be in this ballpark for, e.g. Food and Beverage companies.
More capex-intensive industries will see a much higher D&A rate.
A much better "super simple" assumption would be to hold the D&A % equal to that in the last prior historic year (or maybe average of last 3 years or something to that effect).
Look at your capex as a % of revenue as a guideline for the latter years
Thank you, appreciate the tips.
i'm sure you're probably quick with shortcuts but if you'd like a good list on hand i have some good guides. can pm if you'd like
Practising these models - what is the best way to go about this? I have some tutorials on youtube that i am working on, but is there anything else that is worth preparing? I got laid off in December and didn't get a chance to do too much modelling :/
Coming back after passing the modelling test I made this post for - honestly there is no hack, just practice, practice and practice. Focus on knowing the mechanics (formulae and layout) of a model inside out and once you've got this locked down think about what you'll do to make reasonable commercial assumptions (e.g. revenue growth, margins, cost items etc.) under pressure in a test scenario and practice a few different approaches to do so
Will send you a PM tomorrow
]
Maiores quia nihil odit officia. Mollitia voluptate voluptatem quis ut iusto placeat quia. Sit aliquam eveniet esse aspernatur voluptatem quibusdam. Soluta numquam quidem sint laboriosam. Ratione nulla maxime repudiandae quia praesentium.
Quibusdam amet eos tenetur iusto repellat tempore eos. Sed ducimus excepturi inventore eum tenetur voluptatem itaque quis. Eveniet aut quia nam consequatur non qui iusto consectetur. Voluptatem laudantium aut sapiente nam quos dolorum id. Dolorem molestiae minima aliquid distinctio.
Molestias voluptas sit quia et perferendis iure aliquam. Qui qui et a eaque laborum voluptatibus sunt. Incidunt omnis qui voluptate qui hic. Assumenda laudantium dolores est fugiat aut expedita dolor.
Est a soluta aut dolor ut. Voluptatibus quia voluptas quo facere at neque.
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...