In the spirit of adding some interactivity to this site, please post your comments and suggestions. Also, feel free to post your questions about investment banking and I will try my best to answer them.
-Andrew
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Comments / Suggestions / Questions…302 comments to Comments / Suggestions / Questions…Leave a Reply |
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Hi Andrew,
First of all, I love your site – so much information and tips.
I started working for a bulge bracket bank in their Technology division 6 months ago, but soon became interested in ibanking and want to make the switch. I’ve been doing some research and heard it’s hard to move from a back office role to front office – is this true? What would be the best way to transition my career at this point? Even if i was to get my MBA, how would I break into IB after working in the back office?
Thanks so much,
Katy
Katy,
Unfortunately, it is very hard to switch from bank office to front office. If you go to a top business school for your MBA, you should have a great shot at making the transition. Most MBA students targeting ibanking are career switchers, either from something else in finance (i.e. your situation) or something totally different. Without the MBA you can try to network you way in to a front office position within your current bank or at other banks. But it definitely will be a challenge.
what is the effect of increase in working capital on cash flows.
what is the impact on cash flow if depriciation changes from 10 years to 5 years
if your working capital requirement increases then your free cash is going to go down
by changing depreciation from 10 to 5 years – annual depreciation is higher so your annual tax shield is higher – higher cash flows
Hi Andrew,
Many thanks for this great site
On a resume; it is acceptable to use semi-colons instead of commas for words separation in 1 bullet sentence, Dummy example:
examining micro/macro-economic factors; SWOT analysis; share performance analysis; comparable company analysis; Porter’s 5 forces analysis; financial performance analysis
Keeping in mind, those are minor tasks for a univ project therefore no need to illustrate further on each point. I have quite few bullets with lots of independent words like the above example, not sure if that’s okay or I should revert to the comma instead.
Appreciated
All the best for the New Year
Jason,
Commas are more widely used in those circumstances, and would be my personal preference. However, I don’t think anyone will ding you for using semicolons.
Hi Andrew,
is there any material to prepare for GCM (ECM and DCM) positions? Is there anywhere where I can check deals?
Nico,
I’m not aware of any but you might want to try http://www.mergersandinquisitions.com. That site often has blog posts related to specific groups. Generally speaking, ECM and DCM interviews are less technical that traditional IB interviews and more markets related. To check deals (and what banks executed them), you would really need a paid resource such as Capital IQ.
and further to that – from what i understand it is a lot harder to get into ECM/DCM as an undergrad. usually viewed as a sort of ‘second degree’ – prove yourself in banking first before going into ECM
Hi Andrew,
I bought the self study program (Integrated Cash Flow Model) and found it very very good, it realy helped me, thanks for such a great program. You also mention in the presentation that other models such as DCF, LBO and M&A can be built on the Integrated Cash Flow Model. Do you currenty (or in pipeline)have self study programs for building these models
Sukhveer,
Thanks very much for your kind feedback on the self study program. I’m really glad to hear that you found it useful. Unfortunately, I haven’t put out any additional self study models. I had intended to, but got sidetracked by other projects. Sorry!
Hi Andrew,
I just had a quick technical question. Company A is buying company B in an all stock transaction. Compant A is offereing 0.5 of its shares for 1 share of company B. They both have the same P/E ratio. Is this accetive or dilutive?
Thanks!
Other things equal, in all stock deal if the P/E ratios are the same, the deal is breakeven (neither accretive or dilutive).
Hey Andrew!
Congrats on this! Wish I had run into it earlier… Keep up the good work!
Hi there and congrats for the website, mess I did not find it before!
Here you are a technical question: let’s say BankA and BankB (both non listed and fully owned subsidiaries of bigger banking groups) want to merge.
How do I calculate the capital impact (Regulatory Cap/RWA) at BankA GROUP Level, assuming BankA decconsolidates from its group?
I have two options I’m working on, on the two of them RWA is not in discussion and is calculated by subtracting BankA RWAs from its GROUP total, the tricky part comes with Numerator:
Option A: Value of BankA – TCE of BankA
Option B: Value of BankA – historic price of BankA
I know the calculations needs some more “fine tunings”, but this is definitely the main driver.
Thanks in advance
Hi Andrew,
Thanks for the great site and I definitely appreciate it.
Recently I came across a difficult question in my interview, “If you can have only one financial statement, which one will you pick and why”. Do you have any idea regarding this? I did some research on google but it seems people have different answers.
Many thanks in advance.
Best Regards,
Joey
Joey,
I hate this question. It is a stupid question. And to be frank, I have no idea what the answer is because you would never ever do any analysis with just one financial statement. But okay, if you are asked this in an interview, you need to answer it. I would say the following: First, it depends on the situation and the type of company. If I were analyzing a financial institution such as a bank, I would say the balance sheet (though in today’s world, nobody on Wall Street can get a good understanding of a bank’s financial position given all the derivative exposure and off-balance sheet stuff – but that’s a discussion for another time). For most other companies/industries, I would likely want the income statement to get a quick understanding of revenue growth, margins and profitability. That’s the best answer I can give you.
First of all, thank you for the great resources on the website!
I ran into a couple interview questions that confused me a bit and was hoping to get some clarity.
Both were accounting related.
Q1: Let’s say I have a factory with a book value of 6. I was able to sell it for 10. Walk me through what happens on the statements. No tax.
My thoughts:
I/S -> nothing
B/S -> Assets: Cash +10, PPE -6 = (+4) L+E: SE +4 = (+4)
CFS -> ?
Q2:
a) I want to buy a factory for 100 with 50% cash and 50% debt. Walk me through what happens to the statements.
I/S -> nothing
B/S -> Assets: Cash -50, PPE + 100 = (+50) L+SE: Debt +50 = (+50)
CFS -> ?
b) What happens after year 1 with 40% tax and 10 year straight line depreciation.
(I was able to get part B with no problems at all, but part a threw me for a loop when trying to figure out the CF statement.)
Thanks for the help.
Sam,
Q1:
IS: Net income +4 due to gain on sale
CF: Net income +4 (CF from operations), Sale of Assets +6 (CF from investing). Net effect, Cash +10 (remember decreasing an asset is a SOURCE of cash)
BS: Cash +10, Fixed Assets -6, so net Assets +4, Retained Earnings +4 and we are balance
Q2 (Part A):
IS: no change
CF: Purchase of assets/capex +100 (so -100 cash from investing), debt +50 (+50 cash from financing), so net -50 cash
BS: Cash -50, Fixed Assets +100 (so net assets +50), debt +50 and we are balanced.
For these types of questions, always do the income statement first, then the cash flow and last the balance sheet
Hi Andrew
first of all,
Thank you for the great resources on the website~
Recently I came across a fit question in my interview,
“How do you persuade others to achieve a desired result”
My story is to find sharing opinion, use data and facts, finaly persuaded my colleagues to accept my proposal
is it right?
Hey Andrew, thanks for everything on this website. The in-depth explanations are very helpful, and allowed me to prepare effectively for this past recruiting season to get a full-time offer at a TAS. I was wondering what information you had on some middle market investment banks. The three I am interested in are BMO Capital Markets, Duff & Phelps investment bank, and Houlihan Lokey. Could you possibly compare each to other firms? Can you speak in particular to their offices in New York and Chicago. Are they a reputable firms, what sort of coverage do their analysts get, are their analysts comparable (skills, pay, hours, etc.). Thank you.
FYI, BMO Capital Markets is NOT a Mid Market IB…
and further to that – pay will be on par with american bulge brackets, and BMO is big in the energy/natural resource space. The fact that I have never even heard of the two other firms speaks to BMO’s reputation/size…
Dear Sir
Just to seek some clarifications as I find that many people are quite perplexed or confused with the following:
1) For the computation of group/consolidated ROE, do we minus profit attributable to minority interests (MI) from the net profit in the numerator and also minus MI from total shareholders funds from the denominator? What is the actual formula?
2) For computation of group/consolidated gearing ratio or net gearing ratio,do we minus MI from the total shareholders funds?
3) Is there a difference between net profit attributable to shareholders of company and net profit attributable to owners of company?
4) Is there a difference between total equity and total shareholders funds?
Thanks and Regards.
CF Chong from Malaysia
Hi Andrew, I am a final year student of software engineering in Sydney. My GPA is about 3.25, I have commercial bank working experiences . I like to apply investment bank. Can you give me some suggestions hot to apply and which is best way to me. Thanks
campus recruitment program? usually the only way to get in. with a 3.25 – going to need A LOT of networking.
Hey!
I am a 19 year old Swedish student and I`ll finish school this year and I am going for uni. I have superb grades and I love I-Banking. The current dream is to become a analyst in M&A. But the big question is, what should I do now? What should I study? Were should I study? I`m sure I have what it takes, I just need to find a way to show my talents
Thank you verry much for your amazing site!
Hei David,
Du kan studier i økonomi …
Jag vet men vart? Vilket program? Det finns så många olika inriktningar!
Dear Andrew,
Although it is first time I am on your website but given the comments I have read, I hope you can be of help to respond to my academic question:
1. When a company incurs expenses:
a) Assets may increase,
b) Liabilities may increase,
c) Cash may increase,
d) Common Stock may decrease.
I thought that the right answer is d) but it was incorrect. Can you assist, please. Thanks much in advance & Best. A
d is the worst answer to choose..incurring expenses has nothing to do with common stock. common stock would only increase or decrease from a financing or a recap…incurring expenses will most likely increase liabilities: for example if you have an employee working for you you would recognize his salary as an expense…if this is yet to be paid then you to balance the expense entry you would increase salary payable or something similar..
Andrew,
to echo others, great site. Two questions:
1. You mention that Debt or Equity Capital markets are typically viewed as “investment banking-lite” with a slightly better lifestyle but also diminshed career prospects/ compensation and lower status perception. Can you distinguish the difference between the capital markets functions and other investment banking functions as well as the exit strategies/ career prospects for each?
2. For prospective MBA students deciding between management consulting and investment banking. What are the pros and cons of each career in terms of career prospects for someone looking to stay in finance and is willing to endure the grind of the IB lifestyle but probably not for more than 5 years and will want an exit strategy.
Thanks
Hi Andrew
I am now the second year PhD student in Economics in a top 50 university in US. Due to the job market for Econ PhD is so bad, I consider go to financial industry after graduation. I concentrate on econometrics and financial economics and I have BA in accounting and MA in statistics, but I still find it is so hard for a PhD to find an intern in IBD. Do you have any suggestions for my situation? It is hard for me to give up my current PhD studies but I sill consider to have an MBA degree after graduation.
But could you please offer me some suggestions for PhD students especially Econ PhD students who desire for IBD?
Thanks a lot!