BIWS Discounted Cash Flow (DCF) Practice Test

Selecting companies and transactions based on GIST involves assessing Geography, Industry, Size, and Time. This approach prioritizes relevant benchmarks that align closely with the company being valued, ensuring that the comparisons made in a DCF analysis are meaningful and contextually appropriate.

Geography refers to the location of both the company and its peers, which can significantly impact operations due to regional market conditions, regulatory environments, and economic factors. Industry highlights the specific sector, reinforcing the importance of similar business models, competition, and market dynamics. Size is critical because companies of different sizes may have distinct growth trajectories, risk profiles, and capital requirements; therefore, aligning with similar-sized companies provides a clearer picture for analysis. Lastly, Time reflects the period of historical performance and projections, ensuring that selected companies are operating within a similar timeframe to maintain relativity in growth expectations and market conditions.

Together, these four dimensions help create a robust framework for making accurate and relevant comparisons that enhance the credibility of a DCF valuation.