If you’re getting ready for the Series 79 (FINRA), having the right practice material can make a huge difference. This test is built to simulate real exam conditions so you can test your knowledge under pressure. It’s not just about getting the right answers — it’s about understanding why an answer is correct. As you go through these questions, focus on improving your decision-making and identifying patterns. With consistent practice, you’ll feel much more prepared and confident when it’s time for the actual exam.
Updated for 2026: This guide provides a structured approach to help you prepare effectively, understand key concepts, and practice real exam-level questions.
How to Use This Practice Test
- Start by reviewing key concepts before attempting questions
- Take the test in a timed environment
- Analyze your mistakes and revisit weak areas
Why This Practice Test Matters
This practice test is designed to simulate the real exam environment and help you identify knowledge gaps, improve accuracy, and build confidence.
| Exam Name | Series 79 – Investment Banking Representative Practice Exam (2026 Updated) |
|---|---|
| Exam Provider | Financial Industry Regulatory Authority (FINRA) |
| Certification Type | Investment Banking License (M&A, Capital Raising, Advisory) |
| Total Practice Questions | 90+ Advanced MCQs (M&A + Valuation + IPO + LBO + Deal Structuring) |
| Exam Domains Covered | • Mergers & Acquisitions (Buy-side, Sell-side, Synergies, Deal Process) • Valuation Methods (DCF, Comparable Companies, Precedent Transactions) • Leveraged Buyouts (LBO Modeling & IRR Analysis) • Equity & Debt Offerings (IPO, Follow-ons, Book-Building) • Financial Modeling & Analysis (EBITDA, WACC, Free Cash Flow) • Regulatory Requirements & Compliance (FINRA, SEC rules) |
| Questions in Real Exam | • Total: 75 Questions • 70 Scored + 5 Pretest Questions • Strong focus on real deal scenarios • Heavy emphasis on valuation and M&A concepts |
| Exam Duration | • Total Time: 150 Minutes (2.5 Hours) • Analytical and calculation-based questions • Requires strong conceptual clarity and speed |
| Passing Score | • Passing Score: 73% • Requires strong understanding of deal mechanics • High focus on valuation accuracy |
| Question Format | • Multiple Choice Questions (MCQs) • Scenario-Based M&A and Deal Questions • Valuation & Financial Modeling Concepts • IPO and capital markets questions |
| Difficulty Level | Advanced (Deal-Focused + Analytical + Valuation Heavy) |
| Key Focus Areas | • Enterprise value vs equity value calculations • Accretion/dilution analysis and EPS impact • Synergies (cost and revenue) in M&A deals • LBO modeling (IRR, leverage, exit multiples) • IPO pricing and book-building process • Discount rates (WACC) and DCF modeling • Comparable and precedent transaction analysis |
| Common Exam Traps | • Confusing equity value vs enterprise value • Misinterpreting accretion vs dilution impact • Overlooking cash/debt adjustments in valuation • Misapplying WACC in DCF calculations • Ignoring synergies in deal valuation • Mixing up trading comps vs precedent transactions • Misreading IPO pricing and demand dynamics |
| Skills Developed | • Financial modeling and valuation analysis • M&A deal structuring and negotiation understanding • IPO and capital markets expertise • Strategic financial decision-making • Risk analysis and investment evaluation • Corporate finance and advisory skills |
| Study Strategy | • Focus heavily on valuation methods (DCF, comps, precedent) • Practice accretion/dilution and LBO scenarios • Master enterprise value vs equity value concepts • Understand deal process end-to-end • Take timed mock exams for speed improvement • Review real-world deal examples • Analyze mistakes to strengthen weak areas |
| Best For | • Investment banking analysts and associates • Corporate finance professionals • M&A and advisory specialists • Individuals pursuing investment banking roles |
| Career Benefits | • Required license for investment banking roles • Opens opportunities in M&A, private equity, and advisory firms • Enhances valuation and financial modeling expertise • Builds credibility in corporate finance and deal-making |
| Updated | 2026 Latest Version – Based on Current FINRA Guidelines |
1.
Which valuation method is most commonly used in M&A transactions?
A. Book value
B. Discounted Cash Flow
C. Comparable Company Analysis
D. Dividend yield
Answer: C
Rationale: Comparable company analysis (trading comps) is widely used in M&A because it reflects current market valuations of similar firms. It provides a real-time benchmark for pricing deals and is often combined with precedent transactions for accuracy.
2.
Which metric is most relevant in leveraged buyouts (LBOs)?
A. Dividend yield
B. Debt/EBITDA
C. P/E ratio
D. Beta
Answer: B
Rationale: Debt/EBITDA measures leverage and ability to service debt, making it critical in LBOs where significant borrowing is used to finance acquisitions.
3.
Which document provides detailed financial and operational data in an M&A deal?
A. Prospectus
B. Confidential Information Memorandum
C. Term sheet
D. Pitch book
Answer: B
Rationale: A CIM contains comprehensive company data, including financials, operations, and growth prospects, and is shared with potential buyers during the deal process.
4.
Which is a fairness opinion?
A. Audit report
B. Legal opinion
C. Valuation assessment
D. Tax filing
Answer: C
Rationale: A fairness opinion assesses whether the transaction price is fair from a financial perspective to shareholders, helping boards fulfill fiduciary duties.
5.
Which is a key driver of enterprise value?
A. Net income
B. EBITDA
C. Dividend
D. Book value
Answer: B
Rationale: EBITDA is widely used in valuation multiples because it reflects operating performance independent of capital structure and taxes.
6.
Which transaction involves issuing new shares?
A. Secondary offering
B. Primary offering
C. Tender offer
D. Buyback
Answer: B
Rationale: A primary offering involves issuing new shares to raise capital, increasing shares outstanding and diluting ownership.
7.
Which is most relevant in precedent transactions analysis?
A. Historical multiples
B. Future projections
C. Book value
D. Dividends
Answer: A
Rationale: Precedent transactions rely on past deal multiples to estimate valuation ranges based on actual acquisitions.
8.
Which is a hostile takeover defense?
A. IPO
B. Poison pill
C. Dividend
D. Stock split
Answer: B
Rationale: Poison pills dilute ownership for hostile acquirers, making takeovers more difficult and expensive.
9.
Which valuation method uses future cash flows?
A. Comparable analysis
B. DCF
C. Book value
D. Liquidation
Answer: B
Rationale: Discounted Cash Flow analysis estimates intrinsic value by projecting future cash flows and discounting them to present value.
10.
Which is a sell-side activity?
A. Buying company
B. Advising seller
C. Lending
D. Trading
Answer: B
Rationale: Sell-side investment bankers represent the company being sold, helping find buyers and negotiate terms.
11.
Which is MOST important in IPO pricing?
A. Book value
B. Investor demand
C. Dividend
D. Debt
Answer: B
Rationale: IPO pricing depends heavily on investor demand determined during book-building.
12.
Which multiple is most common in M&A?
A. P/E
B. EV/EBITDA
C. Dividend yield
D. Book value
Answer: B
Rationale: EV/EBITDA is preferred because it compares enterprise value to operating earnings.
13.
Which is a buy-side role?
A. Selling company
B. Advising acquirer
C. Issuing stock
D. Marketing IPO
Answer: B
Rationale: Buy-side bankers advise clients acquiring companies.
14.
Which is dilution?
A. Increasing earnings
B. Reducing ownership percentage
C. Paying dividends
D. Issuing debt
Answer: B
Rationale: Issuing new shares reduces existing shareholders’ ownership.
15.
Which is accretive?
A. Decreases EPS
B. Increases EPS
C. No effect
D. Reduces revenue
Answer: B
Rationale: Accretive deals increase earnings per share post-transaction.
16.
Which is NOT a valuation method?
A. DCF
B. Comparable analysis
C. Precedent transactions
D. Yield curve
Answer: D
Rationale: Yield curve is not a valuation method.
17.
Which document outlines deal terms?
A. CIM
B. Term sheet
C. Prospectus
D. Audit
Answer: B
Rationale: Term sheet summarizes key deal terms.
18.
Which is a synergy?
A. Cost savings
B. Losses
C. Taxes
D. Dividends
Answer: A
Rationale: Synergies are benefits like cost reductions or revenue increases.
19.
Which is enterprise value formula?
A. Equity + Debt – Cash
B. Revenue – Cost
C. Net income × shares
D. Assets – liabilities
Answer: A
Rationale: EV reflects total firm value including debt.
20.
Which is a tender offer?
A. Buying shares directly from shareholders
B. IPO
C. Bond issuance
D. Dividend
Answer: A
Rationale: Tender offers allow acquiring shares directly.
21.
Which is a restructuring activity?
A. IPO
B. Debt refinancing
C. Dividend
D. Stock split
Answer: B
Rationale: Refinancing improves capital structure.
22.
Which is book-building?
A. Pricing IPO
B. Valuing bonds
C. Trading
D. Auditing
Answer: A
Rationale: Book-building determines demand and price.
23.
Which is NOT a synergy?
A. Revenue increase
B. Cost reduction
C. Market expansion
D. Debt increase
Answer: D
Rationale: Debt increase is not synergy.
24.
Which is dilution risk?
A. New shares issued
B. Debt repayment
C. Dividends
D. Buyback
Answer: A
Rationale: New shares reduce ownership.
25.
Which is most relevant in IPO?
A. Demand
B. Debt
C. Taxes
D. Assets
Answer: A
Rationale: Demand drives pricing.
26.
Which is a fairness opinion purpose?
A. Legal
B. Tax
C. Financial fairness
D. Audit
Answer: C
Rationale: It evaluates deal fairness.
27.
Which is leverage?
A. Equity
B. Debt
C. Dividend
D. Cash
Answer: B
Rationale: Leverage refers to use of debt.
28.
Which is hostile defense?
A. IPO
B. Poison pill
C. Dividend
D. Buyback
Answer: B
Rationale: Poison pills deter takeovers.
29.
Which is accretion/dilution analysis?
A. EPS impact
B. Revenue
C. Debt
D. Assets
Answer: A
Rationale: Measures EPS change after deal.
30.
Which is LBO characteristic?
A. High equity
B. High debt
C. Low risk
D. No leverage
Answer: B
Rationale: LBOs rely heavily on debt financing.
31.
In an acquisition, goodwill arises when:
A. Purchase price < book value
B. Purchase price > fair value of net assets
C. Debt exceeds equity
D. Revenue declines
Answer: B
Rationale: Goodwill represents the excess of purchase price over the fair value of identifiable net assets. It reflects intangible factors such as brand value, synergies, and expected future earnings beyond the acquired company’s tangible assets.
32.
Which multiple is most affected by capital structure?
A. EV/EBITDA
B. P/E ratio
C. EV/Sales
D. EV/EBIT
Answer: B
Rationale: The P/E ratio is based on equity value and net income, both of which are impacted by interest expense and leverage. In contrast, enterprise value multiples normalize for capital structure differences.
33.
In a DCF model, the discount rate typically used is:
A. Cost of debt
B. Risk-free rate
C. WACC
D. Dividend yield
Answer: C
Rationale: The weighted average cost of capital (WACC) reflects the blended cost of equity and debt financing and is used to discount free cash flows in DCF analysis.
34.
Which is a key assumption in LBO modeling?
A. Low leverage
B. Stable cash flows
C. High dividends
D. Low debt
Answer: B
Rationale: LBOs rely on predictable and stable cash flows to service large amounts of debt used in the transaction.
35.
Which scenario increases accretion in a deal?
A. High purchase price
B. Low synergies
C. Lower financing cost
D. High dilution
Answer: C
Rationale: Lower financing costs reduce interest expense, improving net income and increasing the likelihood that a deal will be accretive to EPS.
36.
Which is most important in synergy estimation?
A. Past earnings
B. Cost savings and revenue gains
C. Book value
D. Dividends
Answer: B
Rationale: Synergies arise from cost efficiencies or increased revenues when two companies combine, making them critical to valuation in M&A.
37.
Which type of buyer typically pays the highest premium?
A. Financial buyer
B. Strategic buyer
C. Retail investor
D. Broker
Answer: B
Rationale: Strategic buyers can realize synergies, allowing them to justify higher acquisition premiums compared to financial buyers.
38.
Which is NOT included in enterprise value?
A. Debt
B. Equity
C. Cash
D. Dividends
Answer: D
Rationale: Enterprise value includes equity, debt, and subtracts cash, but dividends are not part of the valuation calculation.
39.
Which analysis compares similar public companies?
A. DCF
B. Precedent transactions
C. Comparable company analysis
D. LBO
Answer: C
Rationale: Comparable company analysis evaluates publicly traded peers to estimate valuation multiples.
40.
Which is a financial buyer?
A. Corporation
B. Private equity firm
C. Supplier
D. Customer
Answer: B
Rationale: Financial buyers, such as private equity firms, focus on financial returns rather than operational synergies.
41.
Which is most relevant in IPO valuation?
A. Book value
B. Comparable multiples
C. Debt ratio
D. Dividend
Answer: B
Rationale: IPO pricing heavily relies on comparable company multiples and market demand.
42.
Which increases enterprise value?
A. Higher debt
B. Lower revenue
C. Higher cash
D. Lower EBITDA
Answer: A
Rationale: Enterprise value includes debt, so an increase in debt raises EV, assuming other factors remain constant.
43.
Which is a restructuring activity?
A. IPO
B. Spin-off
C. Dividend
D. Stock split
Answer: B
Rationale: Spin-offs involve separating a business unit into a new entity, often to unlock value or improve focus.
44.
Which is a key IPO document?
A. CIM
B. Prospectus
C. Term sheet
D. Pitch book
Answer: B
Rationale: The prospectus provides detailed information about the company and offering to investors.
45.
Which is dilution?
A. Increasing EPS
B. Decreasing EPS
C. Increasing revenue
D. Reducing debt
Answer: B
Rationale: Dilution occurs when new shares reduce earnings per share.
46.
Which is accretive?
A. EPS decrease
B. EPS increase
C. Revenue decrease
D. Debt increase
Answer: B
Rationale: Accretion means EPS increases post-transaction.
47.
Which is most relevant in DCF terminal value?
A. Growth rate
B. Dividend
C. Debt
D. Assets
Answer: A
Rationale: Terminal value depends heavily on long-term growth assumptions.
48.
Which is a takeover defense?
A. IPO
B. Poison pill
C. Dividend
D. Buyback
Answer: B
Rationale: Poison pills deter hostile takeovers by diluting ownership.
49.
Which multiple is least affected by capital structure?
A. P/E
B. EV/EBITDA
C. Dividend yield
D. EPS
Answer: B
Rationale: EV/EBITDA neutralizes capital structure differences.
50.
Which is a tender offer?
A. Buying shares from shareholders
B. IPO
C. Debt issuance
D. Dividend
Answer: A
Rationale: Tender offers involve purchasing shares directly from shareholders.
51.
Which increases goodwill?
A. Lower purchase price
B. Higher purchase price
C. Lower assets
D. Lower revenue
Answer: B
Rationale: Goodwill rises as purchase price exceeds fair value of net assets.
52.
Which is most relevant in LBO exit?
A. Entry multiple
B. Exit multiple
C. Dividend
D. Assets
Answer: B
Rationale: Exit multiple significantly impacts returns in LBOs.
53.
Which is a buy-side role?
A. Selling company
B. Advising acquirer
C. Issuing shares
D. Marketing IPO
Answer: B
Rationale: Buy-side bankers assist acquiring firms.
54.
Which is a sell-side role?
A. Buying company
B. Advising seller
C. Lending
D. Trading
Answer: B
Rationale: Sell-side bankers represent sellers.
55.
Which is a synergy?
A. Cost savings
B. Debt increase
C. Taxes
D. Dividend
Answer: A
Rationale: Synergies create additional value through efficiencies.
56.
Which valuation uses future projections?
A. Comparable
B. DCF
C. Precedent
D. Book
Answer: B
Rationale: DCF uses projected cash flows.
57.
Which is most relevant in fairness opinion?
A. Legal
B. Financial fairness
C. Tax
D. Audit
Answer: B
Rationale: It evaluates fairness of transaction price.
58.
Which is most relevant in M&A premium?
A. Book value
B. Market price
C. Historical earnings
D. Dividend
Answer: B
Rationale: Premium is paid over current market price.
59.
Which is leverage ratio?
A. P/E
B. Debt/EBITDA
C. EPS
D. Yield
Answer: B
Rationale: Measures debt relative to earnings.
60.
Which is key in deal success?
A. Timing
B. Price and synergies
C. Dividend
D. Debt
Answer: B
Rationale: Successful deals depend on accurate valuation and achievable synergies.
61.
Which factor most increases enterprise value in a DCF model?
A. Lower discount rate
B. Higher taxes
C. Lower EBITDA
D. Higher debt
Answer: A
Rationale: A lower discount rate (WACC) increases the present value of future cash flows, raising enterprise value. Since DCF heavily depends on discounting, small changes in WACC can significantly impact valuation outcomes.
62.
Which is most important in LBO returns?
A. Dividend yield
B. Debt repayment
C. Market cap
D. Book value
Answer: B
Rationale: In LBOs, reducing debt over time increases equity value and drives investor returns. Deleveraging is a primary driver of value creation in leveraged buyouts.
63.
Which buyer focuses on IRR targets?
A. Strategic buyer
B. Financial buyer
C. Retail investor
D. Broker
Answer: B
Rationale: Financial buyers, such as private equity firms, focus on achieving target internal rates of return (IRR), typically through leverage, operational improvements, and exit strategies.
64.
Which transaction increases EPS?
A. Dilutive deal
B. Accretive deal
C. Neutral deal
D. Loss-making deal
Answer: B
Rationale: Accretive deals increase earnings per share post-transaction, often due to synergies or favorable financing structures.
65.
Which is most relevant in accretion/dilution analysis?
A. Revenue
B. EPS
C. Assets
D. Dividend
Answer: B
Rationale: Accretion/dilution analysis evaluates the impact of a transaction on EPS, determining whether it benefits shareholders.
66.
Which is NOT included in free cash flow?
A. EBITDA
B. CapEx
C. Taxes
D. Dividends
Answer: D
Rationale: Free cash flow includes operating cash flow minus capital expenditures. Dividends are a financing decision, not part of operating cash flow calculations.
67.
Which valuation method is most theoretical?
A. Comparable analysis
B. Precedent transactions
C. DCF
D. Trading multiples
Answer: C
Rationale: DCF relies on projections and assumptions, making it more theoretical compared to market-based methods like comparables.
68.
Which increases goodwill?
A. Lower purchase price
B. Higher purchase price
C. Lower assets
D. Lower revenue
Answer: B
Rationale: Goodwill increases when the purchase price exceeds the fair value of net assets.
69.
Which is most relevant in IPO allocation?
A. Demand
B. Debt
C. Assets
D. Taxes
Answer: A
Rationale: Investor demand determines allocation and pricing in IPOs.
70.
Which multiple is used for capital-intensive industries?
A. P/E
B. EV/EBITDA
C. Dividend yield
D. Book value
Answer: B
Rationale: EV/EBITDA is preferred because it removes effects of capital structure and depreciation.
71.
Which is a defensive M&A tactic?
A. IPO
B. Poison pill
C. Dividend
D. Split
Answer: B
Rationale: Poison pills discourage hostile takeovers.
72.
Which increases IRR in LBO?
A. Lower exit multiple
B. Higher exit multiple
C. Lower EBITDA
D. Higher taxes
Answer: B
Rationale: A higher exit multiple increases the final sale price, boosting investor returns.
73.
Which is NOT a synergy?
A. Cost savings
B. Revenue growth
C. Market expansion
D. Debt increase
Answer: D
Rationale: Debt increase is financing, not synergy.
74.
Which is a primary driver of valuation?
A. EBITDA
B. Dividend
C. Debt
D. Taxes
Answer: A
Rationale: EBITDA reflects operating performance and is widely used in valuation multiples.
75.
Which is most relevant in fairness opinion?
A. Legal compliance
B. Financial fairness
C. Tax strategy
D. Audit
Answer: B
Rationale: It evaluates whether a transaction is fair from a financial perspective.
76.
Which is most relevant in precedent transactions?
A. Future projections
B. Historical deal multiples
C. Book value
D. Dividend
Answer: B
Rationale: Precedent analysis relies on past transactions.
77.
Which is dilution?
A. EPS increase
B. EPS decrease
C. Revenue increase
D. Debt reduction
Answer: B
Rationale: Dilution reduces EPS due to increased shares.
78.
Which is accretive?
A. EPS decrease
B. EPS increase
C. Revenue decrease
D. Debt increase
Answer: B
Rationale: Accretion increases EPS.
79.
Which is most relevant in IPO pricing?
A. Book value
B. Investor demand
C. Debt
D. Assets
Answer: B
Rationale: Demand determines final pricing.
80.
Which is a restructuring activity?
A. IPO
B. Spin-off
C. Dividend
D. Split
Answer: B
Rationale: Spin-offs restructure company operations.
81.
Which increases enterprise value?
A. Higher cash
B. Higher debt
C. Lower EBITDA
D. Lower revenue
Answer: B
Rationale: Debt increases EV.
82.
Which is most relevant in LBO entry?
A. Exit multiple
B. Entry price
C. Dividend
D. Assets
Answer: B
Rationale: Entry price determines initial investment.
83.
Which is a buy-side activity?
A. Selling company
B. Advising acquirer
C. Issuing shares
D. Marketing IPO
Answer: B
Rationale: Buy-side advises acquirers.
84.
Which is a sell-side activity?
A. Buying company
B. Advising seller
C. Lending
D. Trading
Answer: B
Rationale: Sell-side represents sellers.
85.
Which is most relevant in DCF terminal value?
A. Growth rate
B. Dividend
C. Debt
D. Assets
Answer: A
Rationale: Terminal value depends on long-term growth assumptions.
86.
Which is leverage?
A. Equity
B. Debt
C. Dividend
D. Cash
Answer: B
Rationale: Leverage refers to use of debt financing.
87.
Which is most relevant in synergy valuation?
A. Cost savings
B. Taxes
C. Assets
D. Dividend
Answer: A
Rationale: Cost savings drive synergy value.
88.
Which is most relevant in IPO process?
A. Book-building
B. Trading
C. Lending
D. Audit
Answer: A
Rationale: Book-building determines demand and pricing.
89.
Which is most relevant in deal premium?
A. Book value
B. Market price
C. Assets
D. Dividend
Answer: B
Rationale: Premium is based on market price.
90.
Which is key in deal success?
A. Timing
B. Price and synergies
C. Dividend
D. Debt
Answer: B
Rationale: Accurate valuation and achievable synergies drive deal success.
Frequently Asked Questions
Is this Series 79 (FINRA) practice test similar to the real exam?
Yes, this practice test is designed to reflect real exam patterns, structure, and difficulty level to help you prepare effectively.
What is the best way to use this Series 79 (FINRA) test for preparation?
Take the test in a timed setting, review your answers carefully, and focus on improving weak areas after each attempt.
Can I retake this Series 79 (FINRA) practice test multiple times?
Yes, repeating the test helps reinforce concepts, improve accuracy, and build confidence for the actual exam.
Is this Series 79 (FINRA) test useful for first-time candidates?
This practice test is suitable for both beginners and retakers who want to improve their understanding and performance.