This chapter covers 49% of the Series 79 exam (approximately 37 questions) and is the foundation for everything else. Every Chapter 2 offering and every Chapter 3 transaction draws on the analytical and diligence work covered here.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 1 | Collection of Data | Public and proprietary data sources, Exchange Act reports (10-K, 10-Q, 8-K, DEF 14A, 13D, 13G, 13F), permissible external and internal communications, research analyst conduct, restricted lists, information barriers |
| 2 | Analysis and Evaluation of Data | Liquidity, profitability, leverage, and valuation metrics; financial-statement modeling; comparable companies and precedent transactions; investor and shareholder behavior; financing alternatives; going-private and issuer tender offer analysis |
| 3 | Due Diligence Activities | The disclosure standard and reasonable investigation, sell-side and buy-side diligence processes side-by-side, Sarbanes-Oxley diligence checkpoints |
Why This Chapter Matters
Half the exam pulls from here, and so does most of the live deal work you'll actually do as an analyst or associate. Before any IPO can price, any M&A bid can land, or any restructuring plan can confirm, someone has built the model, run the diligence, and written the analysis that supports the recommendation. This chapter is that toolkit.
The exam tests whether you can identify the right data source for a given question, build and interpret a comp set or precedent-transactions screen, walk through DCF or LBO mechanics, and run a diligence process appropriate to the deal type: sell-side or buy-side, public or private.
Exam Strategy
At 49% of the exam (37 questions), this chapter dominates your score. Focus on:
- Exchange Act reports and what triggers each one: 10-K/10-Q timing, the eight current-report 8-K triggering events, beneficial-ownership thresholds (5% for 13D / 13G), 13F discretionary-AUM threshold and filing schedule
- Valuation methods: when to use comps vs precedents vs DCF, why precedents include a control premium and comps don't, what's in TEV vs equity value, how to handle net debt, why EV/EBITDA is preferred to P/E for comparable-company work
- Financial-statement analysis: liquidity (current ratio, quick ratio, working capital), profitability (gross margin, operating margin, ROE, ROIC), leverage (debt-to-EBITDA, interest coverage, debt-to-capital), and the multiples derived from them
- Due diligence process by deal type: who runs sell-side diligence (management + advisors prepare data; buyers + their advisors consume), who runs buy-side diligence (acquirer's working group), and where Sarbanes-Oxley certifications enter the chain
- Permissible communications: research analyst conduct rules, restricted lists, information barriers, the quiet period framework that constrains what bankers and research can publish around an offering