From Greenhorn to Gold(wo)man — Complete Reference

The Complete Reference

Every formula. Every definition. Every framework. One document.

CHAPTER 13 OF 13 — APPENDIX

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About This Document

The One Source of Truth

Chapters 1 through 12 told the story. Characters, drama, tension, narrative arc. They made finance memorable.

This document strips all of that away.

No narrative. No characters. No plots. Pure technical content — every concept, formula, framework, and definition from the entire G2G series, compressed for revision, exams, and interview preparation.

16

Sections

120+

Glossary Terms

60+

Formulas

80+

Acronyms

8 pages of pure reference material. Print it. Highlight it. Memorise it.

Section 0 Quick Reference

Fund Economics & GP/LP Structure

The Basic Deal: LPs (limited partners) invest capital into a blind pool. GPs (general partners) manage the fund, make investment decisions, and share in profits.

Capital calls: LPs commit capital; GP draws it down as needed
Management fee: 2% of committed capital (Years 1–5), 2% of invested (Years 6–10)
Carried interest: GP keeps 20% of profits after hurdle
Hurdle rate: 8% preferred return to LPs before carry begins
Blind pool: LPs don't know which companies before investing

Carry Waterfall Formula

Carry = 20% × (Total Distributions − Capital Called − Preferred Return)

Return Metrics

DPI = Distributions Paid / Capital Invested RVPI = Remaining Value / Capital Invested TVPI = (DPI + RVPI) — Total Value to Paid-In Capital

J-Curve: Fund returns are negative in years 1–3 (management fees drag), then climb as exits happen. Total TVPI should reach 1.5x–2.5x by exit.

Sections I–II Quick Reference

Income Statement & Cost Structure

Income Statement Cascade

Revenue − COGS (Cost of Goods Sold) = Gross Profit − OpEx (Selling, General, Admin) = EBITDA (Earnings Before Interest, Taxes, D&A) − D&A (Depreciation & Amortisation) = EBIT (Operating Profit) − Interest Expense − Taxes = Net Income

Key Margin Formulas

Gross Margin % = (Revenue − COGS) / Revenue EBITDA Margin % = EBITDA / Revenue EBIT Margin % = EBIT / Revenue Net Margin % = Net Income / Revenue

Breakeven & Operating Leverage

Breakeven Units = Fixed Costs / (Price − Variable Cost per Unit) Contribution Margin = (Revenue − Variable Costs) / Revenue DOL = % Change in EBIT / % Change in Revenue

Real example: Königshof (manufacturing) EBITDA margin ~22%. Subtrax (SaaS) EBITDA margin ~35%. Manufacturing has higher fixed costs; SaaS has higher variable costs but bigger operating leverage once scaled.

Sections III–IV Quick Reference

Balance Sheet & Cash Conversion Cycle

Balance Sheet Identity

Assets = Liabilities + Equity

Working Capital & Days Metrics

NWC = Current Assets − Current Liabilities DIO = Days Inventory Outstanding = (Inventory / COGS) × 365 DSO = Days Sales Outstanding = (A/R / Revenue) × 365 DPO = Days Payable Outstanding = (A/P / COGS) × 365 CCC = DIO + DSO − DPO (Cash Conversion Cycle)

Königshof

DIO90d

DSO60d

DPO30d

CCC120d

Subtrax (SaaS)

DIO0d

DSO30d

DPO45d

CCC−15d

Free Cash Flow

FCF = Operating Cash Flow − CapEx Cash Conversion Ratio = FCF / Net Income

Sections V–VI Quick Reference

Business Models & SaaS Metrics

SaaS Key Metrics

ARR = Annual Recurring Revenue MRR = Monthly Recurring Revenue = ARR / 12 NRR = Net Revenue Retention = (Starting MRR + Expansion − Churn) / Starting MRR Churn Rate (Monthly) = Lost Customers / Starting Customers

Unit Economics

LTV = Customer Lifetime Value = ARPU × GM / Churn CAC = Customer Acquisition Cost = Sales & Marketing / New Customers Payback Period = CAC / (ARPU × GM) Target LTV:CAC Ratio ≥ 3:1

SaaS Health Metrics

Rule of 40 = Revenue Growth % + EBITDA Margin % Must be ≥ 40% for healthy SaaS Magic Number = (Current Quarter Revenue − Prior Quarter Revenue) / Prior Quarter S&M Spend

Manufacturing Metrics

Capacity Utilisation = Actual Output / Potential Output Fixed Cost Absorption = Fixed Costs / Units Produced Contribution Margin per Unit = Price − Variable Cost

Three-Statement Forecasting: P&L drives revenue and COGS. Balance sheet captures working capital and asset changes. Cash flow integrates both, showing actual cash movements. Link in circulars (e.g., retained earnings feed equity; operating CF feeds debt paydown).

Sixty formulas. One hundred twenty terms. Zero shortcuts.

Section VII Quick Reference

Leveraged Buyouts & Value Creation

Königshof LBO Example

Deal Structure:
Enterprise Value: €80m at 5.0x EBITDA (€16m EBITDA)
Debt: €50m senior (3.1x leverage)
Sponsor Equity: €15m
Seller note: €15m

Exit Year 5: €100m value at 4.2x leverage
Equity Return: €50m → €100m = 2.0x MoM, ~15% IRR

Value Creation Bridge

Sponsor Equity Entry: €15m + EBITDA Growth: €2m → €20m (multiple of 4.2x) = €8m + Debt Paydown: €10m (from cash generation) = Exit Equity Value: ~€35m = Multiple of Money (MoM) = €35m / €15m = 2.3x

Key LBO Formulas

MoIC = Exit Equity / Entry Equity IRR ≈ MOIC^(1/Years) − 1 Leverage Ratio = Total Debt / EBITDA Interest Coverage = EBITDA / Interest Expense

Typical LBO Thresholds

Minimum Target: 2.0x MoM / 20% IRR Entry leverage: 4–5x on EBITDA Exit leverage: 2–3x on EBITDA Annual debt paydown: €2–5m (depending on FCF)

Sources & Uses: Funds come from debt, sponsor equity, seller notes, and sometimes earn-outs. Uses go to purchase price, transaction costs, and working capital needs.

Section VIII Quick Reference

Capital Structure & WACC

Debt vs Equity (High Level)

Debt: Fixed obligations, tax-deductible, cheaper (cost ~4–6%) Equity: Residual claim, costlier (cost ~10–12%) Tradeoff: More debt = higher return but higher risk of default

Capital Stack (Ranking of Claims)

1. RCF (Revolver) — liquidity facility, 0.25x–0.5x 2. TLA (Term Loan A) — amortising, 3–4x 3. TLB (Term Loan B) — bullet, 2–3x 4. HY Bond (High Yield) — unsecured, 1–2x 5. Mezz (Mezzanine) — hybrid, equity-like 6. Equity — junior, highest risk, highest return

Weighted Average Cost of Capital (WACC)

WACC = (E/V) × Re + (D/V) × Rd × (1 − Tax Rate) E = Market value of equity D = Market value of debt V = E + D Re = Cost of equity (use CAPM) Rd = Cost of debt

Capital Asset Pricing Model (CAPM)

Re = Risk-Free Rate + Beta × Market Risk Premium Risk-Free Rate: ~2.5% (10Y govt bond) Beta: 1.0 = market; > 1 = more volatile Market Risk Premium: ~5–6%

Königshof WACC Calculation

Entry equity value: €30m, debt: €50m, total: €80m
E/V = 30/80 = 37.5%, D/V = 50/80 = 62.5%
Re = 2.5% + 1.2 × 5.5% = 9.1%
Rd = 5.0% (blended cost of debt)
Tax rate = 25%

WACC = 0.375 × 9.1% + 0.625 × 5.0% × (1 − 0.25)
= 3.4% + 2.34% = 5.74% ≈ 5.7%

Section VIII.5 Quick Reference

Credit Analysis & Debt Documentation

Credit Committee Framework (6-Point Evaluation)

1. Business quality: Margins, competitive position, track record 2. Sponsor quality: PE firm reputation, portfolio performance 3. Debt metrics: Leverage ratios, interest coverage, amortisation 4. Cash flow: Sustainability, working capital needs, seasonality 5. Covenants: Maintenance covenants protect lender; tight restrictions 6. Stressed case: EBITDA down 20% — can company still service debt?

Typical Debt Covenants

Net Debt / EBITDA ≤ 4.0x (Maintenance) Interest Coverage (EBITDA / Interest) ≥ 2.5x (Maintenance) Max CapEx or Min Cash Flow (Incurrence) Financial Reporting requirements (quarterly)

Adjusted EBITDA Add-Backs

+ One-time transaction costs + Stock-based compensation − Normalised maintenance CapEx = Adjusted EBITDA (bank's view of recurring earnings)

Term Sheet Essentials

Amount, tenor (5–7 years typical) Pricing: Base rate + spread (e.g., SOFR + 300bps) Amortisation: 1–3% per year Flex: How much lender can increase spread or tighten covenants Covenant-Lite deals: Fewer restrictions, higher pricing

Key insight: Lenders care about downside. A stressed case where EBITDA drops 20% should still allow the company to cover interest and avoid covenant breach.

Sections IX–X Quick Reference

Valuation: DCF, Comps, & Precedent Deals

DCF Valuation Steps

1. Project unlevered free cash flows (UFCF) for 5–10 years 2. Calculate Terminal Value = FCFn × (1 + g) / (WACC − g) where g = perpetual growth rate (~2–3%) 3. Discount all flows at WACC to present value 4. Sum PV(UFCF) + PV(Terminal Value) = Enterprise Value 5. Less: Net Debt = Equity Value

Terminal Value as % of EV

Terminal Value typically 60–80% of total Enterprise Value Sensitive to WACC and growth assumptions Use multiple methods: perpetuity growth, exit multiple

Trading Comps: Key Multiples

EV / EBITDA: 8–15x for stable, mature businesses EV / Revenue: 1–5x (SaaS: 5–10x; manufacturing: 0.5–1.5x) P / E Ratio: 12–20x for equities (less useful for levered assets) EV / EBIT: Similar to EV/EBITDA but uses operating profit

Precedent Transactions

Analyse past M&A deals in same industry Typical control premium: 20–40% above stock price Premium reflects: synergies, strategic value, take-private discount Use as sanity check on valuation range

Valuation Summary Example (Königshof)

DCF: €75–85m EV
Trading Comps (5.0–5.5x EBITDA): €80–88m
Precedent Deals (4.8–5.2x): €77–83m
Football Field: €75–88m (low–high range)
Deal at €80m = Mid-point, 5.0x, reasonable

EV-to-Equity Bridge: EV − Net Debt = Equity Value. Make sure to adjust for cash, debt, and minority interests.

Sections XI–XII Quick Reference

M&A Process & Deal Mechanics

Sell-Side Process Timeline (6–9 months)

1. Mandate: Engage investment bank, set process 2. IM (Information Memorandum): 30–50pp overview of business 3. Buyer ID: Bank identifies 15–25 strategic + financial buyers 4. NBO (Non-Binding Offer): Buyers submit preliminary bids 5. Data Room: Confidential details shared with top bidders 6. DD (Due Diligence): Financial, legal, tax, operational reviews 7. Final Bids: Down to 2–3 finalists; negotiations 8. SPA (Share Purchase Agreement): Signed, conditions to close 9. Closing: Conditions satisfied, ownership transfers

Due Diligence Workstreams

Financial DD: Revenue quality, EBITDA normalisation, working capital Legal DD: Contracts, IP, litigation, compliance Tax DD: Current/deferred tax liabilities, restructuring Commercial DD: Market trends, customer concentration, churn Operational DD: Processes, people, capex needs

SPA Key Terms

Purchase Price: Usually cash at close Reps & Warranties: Seller certifies accuracy of financial/legal data Indemnification: Seller indemnifies buyer for breach of reps Working Capital True-Up: Final balance adjusted post-close Locked Box vs Completion Accounts: When valuation locked in?

Purchase Price Allocation (PPA)

Goodwill = Purchase Price − Fair Value of Net Identifiable Assets FVNIA = FV of tangible assets − FV of liabilities Identifiable intangibles: Customer relationships, trade names, tech Excess = Goodwill (amortised over 5–10 years or impairment tested)

Synergy Types

Revenue synergies: Cross-sell, market expansion, pricing power Cost synergies: Overlap elimination (often overestimated) Financial synergies: Lower cost of capital Typical combined target: 5–15% of combined revenue

Earnouts: Portion of price paid post-close if targets hit. Aligns seller/buyer on integration. Typical: 10–20% of purchase price, 2–3 year hold-backs.

The reference strips story away.
What remains is pure finance.

Formula Library

Master Formula Sheet (Preview)

Top 25 formulas across all domains:

Fund Economics

DPI = Dist / Capital
Carry = 20% × (Total − Capital)
TVPI = DPI + RVPI

Income Statement

Gross Margin = (Rev − COGS) / Rev
EBITDA = EBIT + D&A
DOL = ΔEBITx / ΔRev%

Working Capital

CCC = DIO + DSO − DPO
DSO = (A/R / Rev) × 365
NWC = CA − CL

SaaS Metrics

LTV = ARPU × GM / Churn
Payback = CAC / (ARPU × GM)
NRR = (Start + Exp − Churn) / Start

LBOs

MoIC = Exit Equity / Entry
Leverage = Debt / EBITDA
IntCov = EBITDA / Interest

Capital Structure

WACC = (E/V)Re + (D/V)Rd(1−Tx)
Re = Rf + β(Rm − Rf)
Debt/Equity, Interest Coverage

DCF Valuation

TV = FCFn(1+g)/(WACC−g)
EV = PV(UFCF) + PV(TV)
Equity = EV − Net Debt

Multiples

EV/EBITDA, EV/Revenue
P/E Ratio, EV/EBIT
Exit Multiple Analysis

Plus 35+ more in the complete reference including sensitivity analyses, reconciliations, and step-by-step worked examples.

Glossary Preview

120+ Key Terms (Sample)

Accretion/Dilution: EPS impact of a deal (positive = accretive)
Amortisation: Depreciation of intangible assets (goodwill, patents)
Blind Pool: Fund where LPs don't know which companies until invested
Breakeven: Revenue level where profit = zero
Burndown: Rate at which a company burns cash (monthly)
Carried Interest: GP's share of profits (typically 20%)
CCC: Cash Conversion Cycle — DIO + DSO − DPO
EBITDA: Earnings before interest, taxes, D&A — proxy for cash earnings
Equity Value: What shareholders own (Enterprise Value − Net Debt)
FCF: Free Cash Flow — OCF − CapEx, available to all investors
Goodwill: Intangible excess paid over fair value of assets in M&A
Hurdle Rate: Minimum return threshold before carry kicks in (8%)
LBO: Leveraged Buyout — acquisition funded mostly with debt
Leverage: Debt / EBITDA — measure of financial risk
LTV:CAC Ratio: Lifetime value to customer acquisition cost (target 3:1+)
Net Debt: Total debt − cash — true economic debt burden
NRR: Net Revenue Retention — organic growth + expansion − churn
Precedent Transactions: Past M&A deals used as valuation benchmarks
Syndication: Multiple lenders share a debt facility
Waterfall: Order in which profits are distributed (LPs first, then GP carry)

Critical Note

What This Reference Won't Do

⚠ This is a cram sheet, not a textbook

The reference is for revision and recall. Read the chapters first. The narrative teaches intuition — why markets move, why deals fail, why some structures work and others blow up.

This document tests whether you know the concepts. Chapters teach whether you understand them.

Skip the chapters and come straight here? You'll memorise formulas but fail to explain how leverage changes equity returns. You'll know DPI but not why J-curves exist. You'll pass the trivia test but flunk the real-world question: "Walk me through the sources and uses of a leveraged buyout."

Use this correctly: Read all 12 chapters → Test yourself with this reference → Go back to chapters for concepts you're hazy on → Use reference for final polish.

Your Cram Sheet Awaits

Every concept from twelve chapters.
One PDF. Zero narrative. Pure finance.

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You've Reached the End

What's Next?

You have finished all twelve chapters and this reference document. You now have the complete foundation of institutional investment banking.

Next steps:

Review the chapters that felt weakest
Build a model (LBO, DCF, three-statement) from scratch
Use this reference to stress-test your understanding
Practice explaining concepts in 30 seconds (the "elevator pitch" test)
Read live pitchbooks from real deals and trace every number back to a chapter

The real learning: Happens when you apply these concepts to new situations. A formula is just a formula. Understanding when and why to use it — that's the game.

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