Goldman Sachs Interview Preparation

A set of flashcards covering key financial concepts and metrics relevant to preparing for an interview with Goldman Sachs.

Financial Statements

The three main financial statements are the Income Statement, Balance Sheet, and Cash Flow Statement, which connect by showing a company's profitability, financial position, and cash movements.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, used to approximate a company's core operating profitability.

Discounted Cash Flow (DCF)

A financial model that estimates a company's value by projecting future free cash flows and discounting them to the present value using a discount rate.

Enterprise Value (EV)

The total value of a business, including debt and excluding cash, used to assess acquisition cost regardless of capital structure.

Equity Value

The market capitalization of a company, calculated as share price multiplied by shares outstanding, representing the value attributable to shareholders.

Working Capital

Calculated as current assets minus current liabilities, it reflects short-term liquidity and efficiency in managing operating funds.

Accretive Acquisition

An acquisition that increases the buyer's Earnings Per Share (EPS).

Dilutive Acquisition

An acquisition that decreases the buyer's Earnings Per Share (EPS).

IRR (Internal Rate of Return)

An annualized rate of return over time used to evaluate the profitability of investments.

MOIC (Multiple on Invested Capital)

A measure of total value created relative to the capital invested, often used in private equity.

Black-Scholes Model

A mathematical model used to determine the fair value of options based on current stock price, strike price, time to expiration, volatility, and risk-free interest rate.

Cash Flow from Operations

The cash generated from core business activities, essential for evaluating sustainability of earnings.

Free Cash Flow (FCF)

The cash available after necessary reinvestments and operational expenses, critical for assessing financial health.

P/E Ratio

Price per Share divided by Earnings per Share, measuring how much investors are willing to pay per dollar of earnings.

WACC (Weighted Average Cost of Capital)

The average cost of capital from all sources, used as a discount rate in DCF analysis.

Leverage Ratio

Total Debt divided by EBITDA, assessing a company's debt burden relative to its ability to generate cash flow.