Introduction

Welcome to Analysis and Evaluation of Data, the heart of Function 1 and the densest single section on the Series 79.

Exam Weight: Function 1 (Collection, Analysis, and Evaluation of Data) carries 49% of the exam, 37 of 75 scored questions. Within Function 1, this unit on analysis and evaluation is the densest portion, covering financial modeling, ratio analysis, and valuation. The other two F1 units (collection of data and due diligence) share the remainder.

Video Resources



What You'll Learn

In this unit, you'll cover:

  • Levels of Financial Analysis: Individual company analysis, comparable company ("trading comps") analysis, and industry sector analysis
  • Financial Statement Models: Balance sheet, income statement, and cash flow statement components and how they tie together
  • Liquidity Metrics: Current ratio, quick ratio, working capital, debt-to-capital, net debt, and the cash collection cycle
  • Profitability Metrics: EBIT, EBITDA, EBITDAR, EPS, margin stack, and return metrics (ROA, ROE, ROI, ROIC)
  • Leverage Metrics: Interest coverage, debt/EBITDA, and net debt/EBITDA
  • Asset Turnover and Inventory Methods: LIFO vs FIFO during inflation and the LIFO reserve adjustment
  • Valuation Metrics: Enterprise value, EV multiples, equity multiples (P/E, P/B, P/CF), DCF, DDM, NPV, IRR, WACC, beta, and accretion/dilution analysis
  • Precedent Transactions Analysis: Capital restructurings, derivatives, buybacks, tenders, rights offerings, debt issuance, and the filings that support them
  • Investor and Shareholder Behavior Analysis: Mining ownership data to drive marketing and M&A strategy
  • Investment Objectives and Strategies: GARP, growth, value, distressed, momentum, arbitrage, special situations, and more
  • Financing Alternatives: Organizational structures, investor types (QIBs, qualified purchasers), and the menu of debt/equity/hybrid choices
  • Going-Private and Issuer Tender Offer Analysis: The four SEC rules that govern issuer activity during third-party tenders and going-private transactions
  • Evaluation of Alternatives: How bankers translate analytical findings into preliminary recommendations and pitchbook output

Why This Matters

The work in this unit is what investment bankers actually do day-to-day. Every pitchbook, fairness opinion, board presentation, and offering memorandum rests on the comparable-company, precedent-transaction, DCF, and accretion/dilution analyses you build here. The exam tests your ability to read three financial statements, compute the right multiple for the right job, distinguish enterprise value from equity value, and recognize when a transaction triggers heightened disclosure.

Let's start with the three lenses every banker uses to size up a company.