FinTwinby Mentem

Build a banking recommendation from accounting and valuation

Prepare to explain a company's value, a transaction's financing and the assumptions behind your recommendation. Choose practice based on the work you can produce, then build toward a complete case.

Reviewed .

Enter at the first relationship you cannot defend

A correct calculation under one set of assumptions does not establish that the assumptions are reasonable. Keep accounting mechanics, valuation and the final client recommendation connected.

Choose the next piece of work
Current starting pointUseful next step
New learnerComplete accounting foundations before valuation or merger modelling.
Can calculateExplain why the cash flow, multiple or financing assumption belongs in the calculation.
Can explain and modelBuild a full DCF or acquisition case, then respond to changed facts.

Source: Investment banking.

Move from cash generation to the transaction

You can return to a missing prerequisite at any stage. The purpose is a defensible transaction view, rather than completing pages in a fixed amount of time.

For financial-institution interviews, add the two bank lessons after the shared statements and valuation foundations. The Meridian case uses bank earnings, loss allowances and a supplied capital target; an industrial cash-flow or merger model cannot substitute for these mechanics.

  1. Start with Connect profit, cash and the balance sheet and Explain cash tied up in growth. Use Close a linked statement forecast if the statements do not reconcile.
  2. Read Move from the business to shareholders and Use multiples with a consistent denominator. Match the value measure to its earnings or revenue denominator.
  3. Build unlevered free cash flow, study Match risk and discount rate, then Discount cash flows and terminal value. Explain the forecast and terminal assumptions.
  4. Continue to Trace accretion through financing, purchase accounting and mixed financing. Use Test debt, dilution and the synergy hurdle before Cedar and Pine.

Sources: Investment banking; Discount cash flows and terminal value; Cedar and Pine: an accretive deal at the wrong price.

Separate the operating business from the seller's equity

Original fictional enterprise-to-equity bridge

Calculate the equity purchase price and identify what the result does not establish.

  • All figures are fictional US dollars in millions. Enterprise value is 160, unrestricted surplus cash is 8 and financial debt is 28.
  • The buyer acquires all equity. There are no other debt-like items, minority interests, options, fees or purchase-price adjustments.
  • Enterprise value is supplied as an assumption, rather than independently proven.
Show the worked reasoning
  1. Add surplus cash to enterprise value, giving 160 + 8 = 168.
  2. Subtract debt of 28 to obtain equity value of 140.
  3. Reconcile the bridge in reverse. Equity value of 140 plus debt of 28 less cash of 8 returns enterprise value of 160.

The assumed business value implies a 140 equity purchase price. The bridge does not establish that 160 is a justified enterprise value.

Check your reasoning: Subtracting cash and adding debt reverses the shareholders' claim. Treating a reconciled bridge as proof of a fair price confuses arithmetic with valuation.

Test the explanation before adding a larger model

Build a valuation from a blank starting point and explain the main source of value. Then change a material assumption and state whether your recommendation changes. A model that calculates correctly can still support a weak transaction.

  • Match unlevered cash flow with the appropriate discount rate and enterprise-value bridge.
  • Explain why two peers deserve different multiples.
  • Separate accretion from value creation in a financed acquisition.
  • State the evidence that would make you reject the deal or lower the price.

Revise both the model and the recommendation

Core numerical exercises check displayed calculations; written responses use self-review. Compare your submission with the worked logic and correct the earliest broken relationship. Explain the correction before rerunning the model.

The full cases separate checked model results from the investment view and new-facts response. Revisit the recommendation after changing an assumption. A matching model does not grade the judgement in your prose.

Continue the same saved exercise or case so the first response and revisions remain useful. Draft saving depends on the displayed status; check account status for cloud saving and export a backup if saving fails. Marked read, calculation checks and self-review are separate records.

Sources: Investment banking; Cedar and Pine: an accretive deal at the wrong price.

Your next actions

  1. Resolve any accounting gap before attempting the acquisition case.
  2. Build and reverse-check the enterprise-to-equity bridge.
  3. Complete a valuation and state its most important assumption.
  4. Revise the deal recommendation after a downside change.

Put it into practice

Choose the first task that matches your preparation. These links open the FinTwin study workspace under its normal account and saved-work rules.

  1. Connect profit, cash and the balance sheet

    Establish the statement links used in a banking model.

  2. Move from the business to shareholders

    Practise the enterprise-to-equity relationship.

  3. Build unlevered free cash flow

    Translate operating earnings into cash available to capital providers.

  4. Discount cash flows and terminal value

    Build a valuation and inspect its terminal assumptions.

  5. Test debt, dilution and the synergy hurdle

    Connect acquisition financing with the earnings outcome.

  6. Cedar and Pine: an accretive deal at the wrong price

    Practise recommending a transaction after the calculation is complete.

  7. Connect bank interest income with credit expense

    Add bank-specific earnings and credit mechanics when your target team covers financial institutions.

  8. Meridian Bank: earnings, credit and the dividend decision

    Use the capital and earnings evidence to challenge a payout and an equity-market interpretation.

Try the task before revealing its worked answer. Compare the method, revise your reasoning and use the workspace’s save or review controls. Reading this guide does not record a completed lesson.

Sources and scope

This guide describes the current FinTwin lessons, exercises and model cases. The suggested study order and readiness checks are original educational guidance.

The linked lessons and cases document the current FinTwin curriculum. The suggested study sequence and readiness checks are educational guidance; they do not certify interview readiness.

  1. Investment banking — FinTwin. Checked .
  2. Discount cash flows and terminal value — FinTwin. Checked .
  3. Cedar and Pine: an accretive deal at the wrong price — FinTwin. Checked .