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Wall Street Oasis Exam Questions and Answers 100% Pass
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Wall Street Oasis Exam Questions and Answers 100% Pass What does private equity do? - Buys pieces (equity) of companies with the goal of selling the equity within 3-7 years for a profit Who are LPs typically? - Endowments, pension funds, sovereign wealth funds, wealthy individuals and large co...

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  • December 5, 2024
  • 36
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • wall street oasis exam questions and answers 100

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  • Wall Street

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Wall Street Oasis Exam Questions and Answers
100% Pass


What does private equity do? - ✔✔Buys pieces (equity) of companies with the goal of selling the equity

within 3-7 years for a profit


Who are LPs typically? - ✔✔Endowments, pension funds, sovereign wealth funds, wealthy individuals

and large corporations


Profit structure - ✔✔GP (PE firm) returns 80% of profit along with original investment to LPs. Remainder

(carried interest or carry) is split among the GP. LPs also pay an annual management fee to PE firms,

generally amounting to 2% of total assets under management (AUM).


Startup (Early Stage) Investing - ✔✔1. Seed Capital


2. Venture Capital


Seed Capital - ✔✔- Earliest dollars into new start-up


- Founder / family bootstrapping


- Angel investors or VCs


- Minority stake (5-10%) as preferred equity or warrants


- $0.5 - $5.0mm, 0% leverage


- Emphasis on: revenue / customer growth, achieving profitability or demonstrating ability to become

profitable


Venture Capital - ✔✔- Generally first round of institutional money




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,- Unprofitable high growth start-up


- Minority stake 5-10% as preferred equity or warrants


- Several rounds of funding are common


-$5.0mm - $25.0mm, 0% leverage


- Emphasis on: revenue / customer growth, more emphasis on profitability than seed stage


Growth Equity - ✔✔- Capital to help young, profitable, high growth businesses grow faster


- Typically minority stake (10-30%) as common/preferred or warrants


- $10.0mm - $100.0mm, 0% leverage


- Emphasis on: Revenue growth, Margin expansion, exit multiple expansion


Growth buyout - ✔✔- Same as growth equity but a majority stake


- Occasionally employs light leverage


- $20.0mm - $200.0mm, 0-50% leverage


- Potential for more return if leverage is utilized


PIPE (Private investment in public equity) - ✔✔- Purchase of large common / preferred equity stake (5-

20%) in the stock of a publicly traded company


- $25.0mm - $500.0mm


- Emphasis on: growth of target's stock price which appreciates in part due to the target's utilization of

cash from the PIPE


Carve out / divestiture - ✔✔- Same as LBO except investors purchase a part (often non-core) of a bigger

company rather than the whole thing




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,- $25.0mm - $5.0bn (50-80% debt)


- Emphasis on improving operations of what are frequently undermanaged assets


Leveraged buyout (LBO) - ✔✔- Majority control takeover


- Profitable, mature, lower growth public or private businesses


- Utilizes high debt / equity ratio to fund takeover


- $50.0mm - $10.0bn (50-80% leverage)


- Use of target's free cash flow to pay down debt (sometimes a top driver of returns)


- Revenue and profit margin expansion


- Exit multiple expansion


Distressed investment - ✔✔- Purchase, at a discount of the debt or equity of a company at risk of default


- Corporate restructuring, bankruptcies and financial covenant breaches are sources of these

opportunities


- $10.0mm - $5.0bn (0-95% leverage)


- Emphasis on correctly predicting that target will not default or you can help it turn around its

operations


Growth (mid stage) - ✔✔1. Growth equity


2. Growth buyout


Mature (late stage) - ✔✔- PIPE


- Carve out / divestiture


- LBO



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, - Distressed investments


The larger the fund size... - ✔✔the larger the deal size


How many deals per fund, generally? - ✔✔10-12 to remain diversified


Late stage deals generally require... - ✔✔larger equity checks


A goal of PE would be to... - ✔✔Migrate up the stage ladder to increase their AUM (and associated fees)


Diligence philosophies - ✔✔"Industry diligence" versus "financial engineering"




- Some firms have excellent lender relationships and capital structure optimization skills


- Focus more on financial side and outsource industry diligence


Management fees (AUM fees) are meant to cover... - ✔✔a PE firm's annual operating budget (enable the

firm to make new investments and manage existing portfolio)


Carried interest is earned from... - ✔✔Profits from successful exits and dividend recapitalizations


In order to earn full carried interest... - ✔✔A PE fund typically has to generate returns in excess of a

hurdle rate (usually 7-8%)


Other revenue sources for PE: - ✔✔1. Deal fees (Charges target a deal fee as a % of the total size)


2. Monitoring fees (compensation for the owners' ongoing monitoring and managerial assistance)


Optimal fund size - ✔✔Larger funds are frequently harder to invest successfully than smaller funds so

GPs must consider optimal fund size carefully especially since LPs are more likely to commit to the next

fund if the current one generates strong returns


Role structure - ✔✔1. Analyst



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Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025

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