Hi Monkeys,
Out of curiosity, when does it not make sense to use a DCF? I know when cash flows are negative it doesn't make sense, but are there any other reasons?
| +72 | PWP acquisition by Piper cancelled | 28 | 6h |
| +62 | Is my MD a grifter? 16 years, 8 firms | 21 | 1m |
| +54 | "Corporate & Investment Banking" Analyst - Why? | 39 | 2h |
| +47 | MS / GS IBD ACs London interview processes run by nationality? | 43 | 2h |
| +43 | No return offer - UPDATE. | 12 | 1d |
| +42 | What does JEF banker always think they’re EB? | 24 | 3m |
| +41 | Article: UBS Wall Street Rebuild Is a Study in Management Failure | 7 | 3d |
| +37 | Moat of modelling in PE/Finance completely vanished; | 12 | 28m |
| +29 | Lack of talent in IB! | 25 | 1d |
| +28 | What Are The Best Boutiques 2026/2027 | 16 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Refer to google.
Unstable/unpredictable cash flows, difficult to calculate WACC (fin. institutions). But really, there are a myriad of reasons. Use the goog.
What do you use for start ups?
when you're not willing to put in the time. otherwise always ;)
straight from M&I guide: "You do not use a DCF if the company has unstable or unpredictable cash flows (tech or bio-tech startup) or when debt and working capital serve a fundamentally different role. For example, banks and financial institutions do not re-invest debt and working capital is a huge part of their Balance Sheets – so you wouldn’t use a DCF for such companies."
I work in venture capital, and we never use DCF for startups. As the above mentioned, you generally don't use it if you're dealing with a company that has unstable cash flows.
Sit voluptate cum quasi consequatur rerum. Voluptas porro facere rem dolore quas dolorem adipisci nihil. Expedita ut ut quia sapiente sint.
Molestiae similique maxime molestiae ex voluptatem voluptatum quos. Nisi veniam praesentium quia non placeat dolore laudantium recusandae.
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...