Function 1: Collection, Analysis and Evaluation of Data (49% Exam Weight)

Series 79 — Function 1: Collection, Analysis and Evaluation of Data

Master the Series 79 — Function 1: Collection, Analysis and Evaluation of Data function of the Series 79 (Investment Banking Representative) exam with official regulatory rules, quantitative formulas, and targeted practice drills.

Start Series 79 Focused Drill →

Authoritative Series 79 Study Notes

Key Concepts & Regulatory Highlights

The largest Series 79 domain (49% of exam), covering financial statement analysis, Enterprise Value (EV) and Equity Value calculations, diluted share count via the Treasury Stock Method, Discounted Cash Flow (DCF) modeling, Unlevered Free Cash Flow (FCFF), Weighted Average Cost of Capital (WACC), public trading comparables vs. precedent M&A transaction multiples, and M&A EPS accretion/dilution analysis.

📐 Essential Calculation Formulas

Enterprise Value (EV) & Unlevered Free Cash Flow (FCFF)

EV = Equity Cap + Debt + Pref + MI - Cash | FCFF = EBIT(1-t) + D&A - CapEx - ΔNWC

Interest expense is excluded from FCFF because the tax shield is captured inside WACC.

Weighted Average Cost of Capital (WACC) & Treasury Stock Method

WACC = (E/V)Ke + (D/V)Kd(1-t) | Net New Shares = Options - (Options × Strike / Price)

Cost of equity (Ke) is computed via CAPM using levered Beta.

📜 Core Regulatory Rules & Requirements

✓Enterprise Value (EV) vs. Equity Value: EV represents the total operational value of the business to all capital providers (Equity Market Cap + Total Debt + Preferred Stock + Minority Interest - Cash & Cash Equivalents).

✓Treasury Stock Method (Diluted Shares): In-the-money options and warrants are assumed exercised, and the cash proceeds received by the company are assumed used to repurchase shares at the current market price.

✓Unlevered Free Cash Flow (FCFF) & WACC: FCFF = EBIT(1 - Tax Rate) + Depreciation & Amortization - Capital Expenditures - Increase in Net Working Capital. Discounted at WACC, where cost of debt is tax-effected by (1 - Tax Rate).

✓Valuation Multiples Hierarchy: Precedent M&A Transactions typically yield higher EV/EBITDA multiples than Public Trading Comparables because precedent transactions include a 20%–40% control premium and buyer synergies.

✓All-Stock M&A Accretion/Dilution Rule: In a 100% stock-for-stock acquisition with no synergies, the deal is immediately accretive to the Acquirer's EPS if the Acquirer's P/E multiple is higher than the Target's offer P/E multiple.

💡 High-Yield Exam Watchouts

•Quick Accretion Check: Compare the earnings yield (E/P, the inverse of P/E) of the Target to the after-tax cost of the acquisition currency (stock, debt, or cash).
•Goodwill created in an M&A transaction (Purchase Price > Fair Value of Net Identifiable Assets) is NOT amortized on a GAAP income statement; instead, it is tested annually for impairment.

Why Study Series 79 — Function 1: Collection, Analysis and Evaluation of Data?

The Series 79 — Function 1: Collection, Analysis and Evaluation of Data portion of the Investment Banking Representative (Series 79) exam is critical for passing on your first attempt. Understanding these concepts builds both test-day precision and practical regulatory fluency.

Our practice questions and formulas are engineered to mirror the official Series 79 blueprint and statutory complexity you'll encounter at Prometric.

Oro Pro Pass

Oro Pro Pass — Unlock All 8 FINRA Series, Mock Exams 2–4 & Ad-Free Study

Upgrade to remove all advertisements and unlock full-length disjoint simulations for Series 6, 7, 63, 65, 66, 79, and 24.

View Pro Pass Plans →

Ready for the full simulation experience?

Try a Comprehensive Series 79 Practice Exam →