Investment Banking Technicals

51. What is in a pitch book

• A pitch book is a document used by investment banks to pitch potential clients that persuades them to pay for the services the bank has to offer • It is composed of many components including • There are different types of pitch books like the o bank overview (used in smaller companies who have a less familiar name - shows recent deals, the organization of the bank, and recent trends and performance in the market) o sell-side M&A pitch book (contents include bank overview, situation overview - what makes the company attractive for potential buyers, valuation summaries - football field graphs, comps, dcf - , potential buyers, summary recommendations - advising, how many buyers they should approach, and how long it will take - , appendix - more detailed models/data/company overviews) o Buy-side M&A pitch book (not as much valuation work and lists potential targets) o Debt Financing/IPO pitch books (no company profiles but relevant financing models that apply to capital raising) o Management Presentations (created for real clients and runs through an overview within the target company - includes marketing, customers, expansion opportunities, organization chart, and historical/projected financial performance) o Targeted deal pitchbook (more focused on the accretion/dilution for people that know they want to buy a company) o Fairness Opinions (summarizes the valuation for the firm they are buying to see if they are fair based on the market)

16. What do you do for fun

• As you know, I have a passion for running and it is a really good mental block from some of the stress that is around me. It is a good way to build character as well as feel better and healthier • Outside of running, I really enjoy reading and podcasts. Currently I find the genre of economic inequality to be where I am spending the most time reading, as I find it to be an interesting issue that I want to work with in my future

92. What happens when Accrued Compensation goes up by $10

• Assuming a 40% tax rate, operating expense go up by $10 making EBIT fall by $10 and net income fall by only $6 • On the CFS since net income is down by $6 and accrued compensation with increase the cash flow by $10, CFO and net cash flow increase by $4 • On the balance sheet, cash goes up by $4 making assets go up by $4 while liabilities are up $10 and retained earnings is down 6$ making the accounting equation balance

89. Walk me through how Depreciation going up by $10 would affect the statements

• Assuming a 40% tax rate, operating income would decline by $10 but Net Income would decline by $6 • This pours into the cash flow statement as Net Income is down by $6, but the $10 depreciation expense is a non cash item that gets added back in full meaning that both cash flow from operations and net cash flow go up by $4 • For the balance sheet, PPE goes down by $10 on the assets side as cash goes up by $4. Overall assets will fall by $6 and since net income fell by $6, retained earning will go down putting the accounting equation into balance

90. If Depreciation is a non-cash expense, why does it affect the cash balance

• Even though it is a non-cash expense, it is tax-deductible meaning that that the more depreciation a company has, the less it will pay in taxes which affects the cash balance

20. Tell me something that is not on your resume

• For 5-10 hours a week, I spend time interning remotely for a website startup called Financial Professional that has a strong Instagram following of about 800K and works towards the goal of informing new investors the importance of investing and how to get started • I work with two others in the Business Development sector where my specific responsibility is researching the company's new partners, who are investment/money management platforms, to discover fees, restrictions, and risks involved with putting your money into that specific platform • These characteristics then get put into an algorithm that gives recommendations to site users based on their survey results and risk tolerance

99. Now let's say they sell the iPods for revenue of $20, at a cost of $10. Walk me through the 3 statements under this scenario

• For the income statement, revenues go up by $20 and COGS goes up by $10 increasing gross profit, operating income, and pre-tax income by $10 • Assuming 40% tax rate, net income goes up by $6 • For the CFS, the net income is up $6 and inventory decreasing would be an addition to cash flows making net cash flow $16 • With cash up $16 and inventory down $10, assets are up $6 which balances the $6 increase to retained earnings

27. In your last internship, what feedback did you receive

• From a positive standpoint, they had let me know that my diligent work style had helped them throughout my term I had spent there • They believed that I was vocal about what I was confused about and that I was able to finish what I need to ahead of deadlines. • One area they said that I could improve upon was the number of questions I had asked for clarification. Over time, I had worked on this by keeping an information log where I had my notes and worked to put notes together to answer some of my low priority questions

86. How do the 3 statements link together

• From one angle, you have the Net Income from the income statement used in CFS and that cash balance used on the balance sheet • From another angle changes in working capital from the balance sheet feeds into the cash flow statement and changes in investing activities like capex and operating activities like depreciation affect the final balance of the PPE line item

31. Why should we hire you in three sentences

• I am a competent and competitive worker based on my extracurricular and academic results. My consistent and growing curiosity will push me to learn everything I can to become a better team member. I would be a strong addition to your firm based on my ongoing persistence and will to work while not having a lot be given to me

39. What is your leadership style

• I am a critical thinker that enjoys planning, organizing, and executing the project • I analyze decisions carefully in order to evaluate the best way • I enjoy really knowing my teammates as I believe stronger bonds create more motivation as individuals

71. You're a smart guy/girl with a lot of options, and right now the economy is not doing well and lots of banks have failed. Why are you still interested in banking when you could do anything else

• I am drawn to the type of people investment banking attracts • Within the field, you have some of the hardest workers that want to win business and keep an attentive eye on detail in execution in order to exceed client expectations • With that being said, it is clear that the industry is competitive even amongst banks

69. Do you agree with the $700 billion bank bailout

• I am not happy about the bailout, but I realize the necessity for the stimulus since if other financial institutions went down with Lehman Brothers, our financial system would be at ground zero that would bring the economy to the ground with it due to minimal access to capital for business and individuals

48. We like to get our junior staff in front of clients early. If you are with a client and I'm not in the room, what sort of small talk are you going to make

• I believe that it is important to open small talk about how their weekend was or what they enjoy doing outside of the office • It is essential to understand that we are all just people, and with people who are constantly working and under stress, it would be nice for them to talk about something non-work related that they may enjoy

22. What are your greatest weaknesses

• I believe that my competitive side can pose as a weakness in a corporate setting that stems from me being an athlete • Sometimes I may focus too much on detail, which can extend the amount of time to project will take • I have trouble asking for help when it comes to certain tasks

43. How do you handle multiple tasks and deadlines

• I enjoy keeping an online and printed calendar that holds due dates and explains thoroughly what needs to be done to achieve those goals • This method keeps me organized throughout my schoolwork and internships, as it keeps me on track and allows me to pace through whatever work needs to be done

34. Can you describe a time where a team didn't work as intended

Whose fault was it? • In my first year of college, we had our largest project of the year that required a 40-page business plan and hour-long presentation to a board • Our team had some members that did not pull their weight and show up to our planned meetings • I was forced to learn how to create a sense of urgency and acceptance with those who needed to start doing more to contribute

97. At the start of Year 3, the factories all break down and the value of the equipment is written down to $0. The loan must also be paid back now. Walk me through the 3 statements

• At the end of year 3, the equipment is worth $80 due to depreciation so there will be an $80 write-down • Assuming a 40% tax rate, net income declines $48 • On CFS, net income is down $48 but the write-down is non-cash and added back increasing cash flow from operations to $32 • On CFF the $100 payback must be deducted making net cash fall $68 • On the balance sheet as cash is down $68, PPE down $80 making assets down $148 • Debt is down $100 and retained earnings is down $48 making the equation balance

26. Do you think you'll want to stick with banking long-term

• Banking us what excites me. The constant grind of work and learning makes me want to stay within the industry for the long-term • I want to be in a transactional space that constantly has work to be done since I get bored quickly at the end of a learning curve and could never spend my career wasted on repetition • With banking, there is always more to learn at every level. Even as it starts progressing to the skills of project management and relationship building, you are constantly working to develop yourself and be a better employee for your group and firm

50. Walk me through an IPO

• Before launch, the bank must hire advisors and obtain information like financials, industry overviews, and customer data. • The hired lawyers will work with the bank to draft the Form S-1 that goes to the SEC before being listed on an exchange • This will be an ongoing movement back and forth between the bank and the SEC until the form is acceptable for use • From here you value the company and take other information to draft the prospectus that describes the business for investors

57. What is the difference between LevFin and DCM

• Both groups are responsible for coverage and execution of issuing debt, which may include advisory of when to issue, where the bonds are expected to price, what investors to speak to, and how to structure the debt issuance • LevFin deals more with leveraged loans and the financial covenants that may come with this • A lot of firm-specific financial modeling will have to be done, as leveraged loans are not investment grade and there is higher credit risk, in order to create appropriate marketing materials for potential investor base

18. What are your favorite books

• Common Sense by Joel Greenblatt • The World by Richard Haass

5. How well can you multi-task

• Currently while in school balancing a full course load, I am able to manage several extracurricular activities such as being on both the cross country and track team for division I athletics, taking part in three clubs, working remotely via a part-time internship with Financial Professional, while still having time to do my own self-guided learning on topics that interest me such as programing, data analytics, corporate finance, macroeconomics, and financial markets

103. Recently, banks have been writing down their assets and taking huge quarterly losses. Walk me through what happens on the 3 statements when there's a write-down of $100

• Depending on the type of business and their reporting standards, the $100 write-down will negatively impact COGS or OpEx and bring pre-tax income down $100 and net income down $60 assuming a 40% tax rate • This will bring down net income down $60 for the cash flow statement but since the write down is a noncash expense, there will be an addback of $100 that will bring the net change in cash to a positive $40 • Cash will be up $40 on the balance sheet but the asset written down will be reduced by $100 making the assets go down by $60 that is matched by the $60 decrease to retained earnings on the equity side of the equation

91. Where does Depreciation usually show up on the Income Statement

• Depreciation is typically baked in COGS or OpEx but it could be a separate line item depending on the company reporting • It is important to note that it will always be above the operating income line and therefore is always tax-deductible

4. What is the greatest number of classes you have ever took at once and how well did you do in each of them

• During the first semester of my sophomore year, I took 5 classes, but was also involved in the Invest Like the Street informational program that required multiple hours a night to complete • With that semester, I had ended with a 4.0 with almost a perfect score within my accounting course that took a lot of diligent studying and outside learning

56. How is ECM and DCM different from M&A

• ECM and DCM deal more with a broader market. While M&A still deals with the market of potential buyers and sellers, these two product groups advise internal product and coverage groups on what may be the best approach to raise capital for their clients • ECM/DCM professionals must follow the market trends within their asset class in order to make the right recommendations

73. Where did your interest in finance begin

• Early in high school, I had joined a club called DECA which focuses on business case competitions that build leadership and public speaking skills amongst young individuals • Here is where I decided to pick my event in the accounting applications category, which was probably the most difficult from a technical standpoint, forcing me to do constant in-depth studying if I wanted to have a chance to be competitive • I spent weekends really getting into textbooks and teaching myself accounting online which caused me to become more and more curious until I had finally started thinking of it as a hobby and not just studying • This allowed me to place as a state finalist that year and then an international finalist the next • When it came to the end of my senior year of high school, I still had this love for accounting but I didn't want a career that was tax, audit, and reporting as I felt they wouldn't pique my interest • Wanting to do something with reported numbers and help with participating in the advisory of businesses led me towards finance and investment banking as it would give me an avenue to discover more about business capital and growth for the future rather than the past

9. What is EBITDA

• Earnings before interest, taxes, and depreciation/amortization • This is a strong metric to show a company's profitability as it allows you to see how much money is available from operations to pay interest, capex

10. What is EV

• Enterprise value is a metric to measure the value of the operations of a firm • To calculate, you take the equity value and add net debt to show you the value of the company integrating both debt and equity investors

2. Tell me your story / walk me through your resume

• I grew up and attended school in northeastern Connecticut where I took academics along with athletics very seriously. It was in high school that I stuck a passion for accounting and finance due to having the ability to compete in an international case competition through an organization called DECA where I had placed 14th in the world for my accounting applications category. It was from this that I was able to land my first professional internship within a regional public accounting firm where developed strong relationships with the partners to understand the audit, tax, and accounting advisory industry for small businesses and individuals. • I was a two-time All-State athlete and Valedictorian out of a class of 210, so when it came to choosing a college, I wanted to be somewhere that fit my athletic and academic needs. I was able to receive strong athletic and academic aid from La Salle, and I knew the metropolitan area of Philadelphia was a great place of opportunity making the decision that much clearer. • On campus, I knew I wanted to get involved right away, so I joined the Investment and Business Systems/Analytics Club to fit my career interests, as well as the business school's freshman advisory board to establish myself as a leader on campus and help improve the school for current and future students. • I decided to major in finance because while I loved accounting, I realized that I wanted to go through a career that would have a larger learning curve and become more dynamic. From making that decision, I participated in a semester-long investment banking learning program that taught me the ropes of modeling and introduced me to the career in investment banking that I knew would fit my personality and drive my intellectual curiosity to the next level

7. Why did you choose La Salle

• I had applied to many schools and had narrowed it down to Bentley, UConn, Baruch, and La Salle. When I came down to making a decision, I knew that I wanted a school that was in a popular metropolitan area with strong running program. I ended up getting a lot of money in both athletic and merit aid that made no other option justifiable financially. Since coming out debt-free was a top priority of mine, I was willing to take the trade-off of not having as wide of a wall street network

24. Why would you stay here instead of private equity

• I have learned a little about the private equity field but I believe that the work doesn't fit my personality • I want to be in an environment of constant deal flow, and with private equity, you are spending too much time looking at deals to pursue rather than being within a live deal

23. Where else are you interviewing

• I have only been interviewing with investment banks • Investment banking is where I want to be and my plans are to interview until I can get a seat within the field

72. The economy has been improving lately, and more people are "getting interested" in finance. How do I know you're serious and not just following everyone else

• I have started rally studying businesses from a young age and while I explored many career paths, I don't believe there is a better way to understand the many intricacies of a business and its capital structure than banking • Banking gives you 2 years work experience for every year you are there, and I want to put myself in a position to follow the passion that has been growing in my day-to-day life while also learning as much as I possibly can in the best learning experience a job can provide me

79. Let's say that in the future your name turns up as the front page headline of a newspaper one day - what would the story be about

• I hope to write a book someday that will get attention and share my thoughts on the economy, finance, and general working environments as I admire people like Ray Dalio, Joel Greenblatt, and Stephen Schwartzman and enjoy hearing their views

15. Why did you choose to double major in Mathematics

• I knew that working with numbers and being able to understand the quantitative components that go into computers and markets are skills that are in high demand within the labor market. Technology helps an economy as well as a business create growth and efficiency. Being able to understand that technology is currently a need and not an added bonus • The double major has allowed me to supplement my business skills with technological competency that can help me to understand and work with the future of finance

38. Are you a leader or a follower

• I like to say that I am a follower until a situation calls for me to lead • Just as you need to walk before you can run, you need to learn and absorb before you can lead and understand how you can adapt to a situation where you can lead

21. What are your greatest strengths

• I love to learn new things and I continually try to pick up new skills • I am very quantitative when it comes to deep problem solving • I am disciplined when it comes to work that needs to be done, and I will stress what needs to get done until it is through

30. Why would we decide to not give you an offer today

• I see how you could believe my school doesn't have a strong alumni network, but I believe that this shows my persistence as a character • With networking and looking for opportunities, I would have to start early and come off stronger to get to where I want to be

1. Why Investment Banking

• I want to work in investment banking because of the exposure, the people, and the environment. I have always been a person that values learning as much as possible in the shortest period of time and having the ability to take advantage of the investment banking learning curve would allow me to tailor towards this side of my personality. To have access to this and like-minded people that admire grit among others, will allow me to surround myself with strong influences that I will look up to and help me to grow throughout my career. These factors along with many others - including long hours and long-term dedication - create the optimal environment for my personality and make me certain that investment banking is where I want to be

81. What's your personal Beta

• I would be around a 1.5 since I believe I am a person who can follow past methods well, but also take calculated risks to improve something I deem to be inefficient • For example, within my investment club, I have been observing and being an active participant in places I deem to be best fit, but I believe there are many areas that can be improved upon...

83. Let's say that you have $1 million, but you are NOT allowed to invest it or otherwise use it to create more money. What would you spend the capital on instead

• I would donate it all to the success academy charter schools that Joel Greenblatt has worked very hard to build • I believe education is undervalued and significantly underfunded in underprivileged areas and these schools have worked to give parents in these areas an free option to send their kids to a better school that allows them to excel and be some of the top performers in the state of NY despite their backgrounds

63. Let's say you could start any type of business you wanted, and you had $1 million in initial funds. What would you do

• I would want to start a business that had a model of strong, predictable revenues with few barriers to entry and competition in the space • There are many businesses that tend to be unattractive on the outside but create sustainable revenue streams • I have a growing interest in cars/trucks but I also think that the tow truck business presents itself with a strong business models with sustainable revenues • Near highways, there are always going to be cars that continue to drive and that means cars will also begin to break down on a somewhat predictable basis • With the $1 million dollars it would obviously be essential that I invest in required capital expenditures such as a few tow trucks • Then I would have to pay off fixed overhead for a certain period of time like rent • There would also be variable overhead to consider like labor and gasoline over time • Lastly, what would be most important would be to look at spending significant amounts towards initial marketing plans that allow potential customers to know to call our company while in the area

8. Can a company have a negative book equity value

• If a company were to have large cash dividend or an operating loss for a longer period of time, they could essentially have a negative book equity value

106. When would a company collect cash from a customer and not record it as revenue

• If there is some type of service structure, like a subscription or multi-annual contracts, where the revenue is unearned • This sort of money gets recorded as deferred revenue and is only recorded as revenue as the service is fulfilled over time - for now, it counts as a liability

87. If I were stranded on a desert island, only had 1 statement and I wanted to review the overall health of a company - which statement would I use and why

• If you want to use only one statement you should go with the cash flow statement • There is no way to make your company look better through timing differences or other accounting-related stages on the CFS - it is completely true and honest • The overall financial health of any company is its cash flow, so when it is measured via the CFS, you can understand how the company is doing

109. How long does it usually take for a company to collect its accounts receivable balance

• It is calculated as AR days and varies from industry, company, and even sector of the business • Generally, this can be 40-50 days but this can change based on factors of size, price of items, and AR terms given

107. If cash collected is not recorded as revenue, what happens to it

• It is counted as a liability under the deferred revenue line item of the balance sheet • Once the services are delivered, this deferred revenue goes down and real revenue is recorded to be an increase to retained earnings

102. What does negative Working Capital mean - Is that a bad sign

• It is not always a bad sign - there could be a few different scenarios • Some companies have subscriptions or other revenue models that may have a large deferred revenue attached to their balance sheet • Some retail and restaurants have negative working capital because they get a lot of cash paid up front, so they can use more lines of credit and pay them off quickly with the cash they get on hand to create business efficiency • But in a lot of other cases this could be a sign of financial trouble and insolvency as it shows inability to pay off creditors

55. Walk me through a debt issuance deal

• Meet with the client to go over basic business financials, industries, and customers • Work closely on DCM/LevFin to develop debt financing or LBO model for the company to figure out what leverage and coverage ratios as well as covenants might be appropriate • Put all of the gathered information into an investor memo that can be sent out to potential debt investors to win commitments that can help finance a deal (no SEC approval needed)

17. What has been your favorite class in college

• My first-year seminar, which was a discussion-based class with a really intelligent economics professor that allows had a lot to discuss • Our main topic was immigration, trade, and regulation but we also worked with many other political issues that were current. • It wasn't all economics-related and brought discussion amongst the class on what policies could make the world a better place to live in free from institutional injustice

74. What's your greatest fear about investment banking

• My greatest fear about investment banking would be having to work through a difficult market that made deal flow a little tight • Although it would bring along a more competitive landscape, I would not want to be in a situation where there is less work to do as I enjoy environments that are in a constantly fast pace where I can continually say "what's next?"

75. What's your "Plan B" if you can't get into investment banking this year

• My plan B would to go into Big 4 TAS or Valuation where I can learn some essential skills that can be leveraged over to lateraling into investment banking • I believe you get some of the technical knowledge seeing certain parts of the deal, but the pace and environment would be unsustainable long-term for my personality which is why I would want to keep re-recruiting

96. Now let's go out 1 year, to the start of Year 2. Assume the debt is high-yield so no principal is paid off, and assume an interest rate of 10%. Also assume the factories depreciate at a rate of 10% per year. What happens

• Operating Income would decrease by $10 as depreciation of 10% kicks in and Pre-tax income will decrease by $20 as the 10% interest expense will cause for another $10 of expenses • Assuming a tax rate of 40%, net income would decrease by $12 • On the CFS, you add back the depreciation, but the net income is down $12 so CFO and net cash flow will be down $2 • In the balance sheet, cash is down $2 and net PPE is down $10 from the depreciation which is equal to the $12 that is down from net income

28. What 3 words your friends would use to describe you

• Passionate - my friends know that with a goal that I am driven towards, I will follow through and work nonstop to get to where I need to be • Understanding - I have been known to be a good listener and mediator. Whenever there is conflict, I have been known to be the one that assists in figuring it out. • Engaged - My friends know me for someone who is constantly on the move and ready for something new

82. What's the riskiest thing you've ever done

• Running is a sport of many risks and in order to run your fastest in any race, you need to take risks that put you out of your comfort zone • While at one of my most important races, I was competing against one of the best athletes in my region, and I knew I had no chance to even compete with him • I decided to go out on his tail realizing that there would be a high chance that I would blow up, but since I was at a championship meet, I knew that it was a risk that I was willing to take • While I wasn't able to win that race, I got a close second and scored enough points to bring out team into first place for the championship

13. When is a time where you had to deal with a difficult customer/client

• S - I recently worked as a customer service associate at Men's Wearhouse where my main responsibilities were dealing with customer complaints and fixing them with the interest of the customer, as well as the reputation of the brand in mind. • O - One specific time, we had a couple that had fit issues with the suit of the groom the day of their wedding. The personalized hub had sent the wrong order, and this had left the customers scrambling on their wedding day to find something to wear. • A - Working with gentle interaction, I was able to walk this couple through different options that they could pursue this late into the cycle. Since tailoring takes a long period of time, I was able to prioritize their needs and give them the tailoring they needed within that morning, so they had it for their special night. • R - In this process, I had given the couple the color and suit option that they needed with the correct fit, so they were satisfied without losing the company any money in the process

25. Talk about a time that you failed to honor a commitment

• See made a spelling error

36. What is one of the most difficult situations you have faced as a leader and how did you respond

• See team didn't work as intended (business plan)

37. Can you discuss a time where you had to sacrifice your time for the sake of a team project

• See team didn't work as intended (business plan)

44. Tell me about a time you handled conflict in a team

• See team didn't work as intended (business plan)

41. Tell me about a mistake you made on the job

• See the spelling error

19. What are your favorite movies

• The Pursuit of Happyness has been my go to movie since freshman year of high school • At that point, I didn't look at the finance aspect of him being a stockbroker and more at the themes of paternity, persistence, and character • It is truly motivating to see how he gets whipped around in one of the most difficult places to live, but will not stop working towards what he wants until he had gotten to where he wanted to be

100. Could you ever end up with negative shareholders' equity - What does it mean

• The first way this can happen is if a company is running off of multiple net operating losses that make the shareholder equity less than $0 due to continual loss in retained earnings • This can also happen with LBOs that have dividend recapitalizations where the owner takes out large portions of its equity which can sometimes turn that number negative

85. Can you give examples of major line items on each of the financial statements

• The income statement has Revenue and COGS to give you gross profit, a subtraction of operating expenses like SGA to give operating income, interest expense and income to give you pretax income, and taxes to give you net income • The cash flow statement starts with net income in the operations section and adds back D&A, SBC, Changes in Working Cap for investing the changes in capex, sale of assets, and other items are calculated and for financing the cash flows of dividend issuance, new debt, new common shares are calculates • The balance sheet has assets including cash, AR, Inventory, PPE, and DTA the liabilities include AP, DTL, long-term debt, short-term borrowings, accrued expenses, and deferred revenue for equity there are items such as common stock, additional paid-in capital, and any other form of shareholder equity

84. Walk me through the 3 financial statements

• The income statement reports of a company's revenue and expenses to give net income that can be worked into EPS basic and diluted • The cash flow statement is a reconciliation of a company's cash balance that starts with net income and determines a company's cash flows from operating, investing and financing • The balance sheet brings together both statements by extending the basic accounting equation and showing a company's assets, liabilities, and owner's equity using the net income to add to retained earnings and the cash balance from the cash flow statement

68. Can you explain to me, in simple terms, the subprime crisis

• The subprime crisis became an international financial crisis that was driven by risky, predatory lenders and enhanced by irresponsible, highly leveraged investment banking activity when it came to the purchases of mortgage-backed securities like authentic and synthetic CDOs • The percentage of subprime lending went through the roof causing more banks to want to be involved within the MBS arena as the values of CDOs rose sharply • Once the adjustable rates that impacted many of these subprime lenders kicked in around 2007, foreclosures became more and more often as the housing bubble popped and the value of home prices declined • Many banks and financial institutions had high and far too risky exposure to these markets which tightened up credit and capital markets that took a major hit on economic growth • Regulators and credit agencies also played a role within the crisis as they did not speak against the highly risky and fraudulent activities of these institutions

40. Does the leader make the team

• The team makes the team. Every part need to work in order for a team to function properly • If you have something out of place, nothing will work • If you have strong leaders and strong workers, you can make the team

49. What is investment banking

• There are many different aspects of investment banking, but 50000 meters away, it is the advisory of businesses to help them attain financing solutions and strategic moves • With coverage groups, you have people who work in all different services for a specific industry whether that be TMT, Industrials, Healthcare, or Tech • With product groups you work with the specific service and are open to different industries. These services include M&A, DCM, ECM, LevFin, and restructuring

98. Now let's look at a different scenario and assume Apple is ordering $10 of additional iPod inventory, using cash on hand. They order the inventory, but they have not manufactured or sold anything yet - what happens to the 3 statements

• There are no changes to income statement • The cash flow statement causes cash flow from operation to decrease $10 with net cash flows • As cash is down $10 and inventory is up $10, the accounting equation is in balance

11. What are some ways you can value a company

• There are two main mediums that someone can use to value a company: intrinsic valuation and market valuation • Intrinsic valuation includes the discounted cash flows model that works to value a company by projecting out a company's future free cash flows as an annuity for a given period of time (typically from 3-10 years) and a perpetuity from then on. Once these are projected, they are discounted using the company's calculated weighted average cost of capital that measures the investment risk within a company to find the present value of those future cash flows • Market valuation can be implemented through many different methods, the most popular and accurate being comparable analysis whether that be through precedent transactions or trading comps. This allows someone to see how a company is valued within its specific peer group. This shows how investors may value it in the stock market or how private investors may value it in an acquisition point of view

80. Tell me a joke

• There is a fine line between a numerator and denominator, but only a fraction of people would understand that

54. Walk me through a typical buy-side M&A deal

• There is an initial and long-winded focus on finding the right target for the company to purchase that meets their criteria. A lot of research is conducted on potential targets • This list of potential acquisitions is narrowed down and the acquisition timetable is created • Then the contacts/potential targets are contacted and NDAs are negotiated for interested sellers • With the narrowed list, the target valuations are conducted through the six most popular financial models • From here, the LOI is drafted and submitted as valuation is completed and business (company/industry analysis, overview of products/customers, and site visits) as well as financial (financials review, financial statement projections) due diligence is processed • Lastly, tax and legal advisors assist while due diligence is finalized, the definitive agreement is negotiated, financing is secured, and the transactions is approved (SEC, shareholders, regulators)

93. What happens when Inventory goes up by $10, assuming you pay for it with cash

• There will be no change as you are exchanging an asset for an asset that will keep the equation in balance • The only statement that will be affected in total columns in the CFS will go down by $10 and the balance sheet will have rearrangement with cash down $10 but inventory up $10

95. Let's say Apple is buying $100 worth of new iPod factories with debt. How are all 3 statements affected at the start of "Year 1," before anything else happens

• There will be no changes to the income statement at the beginning of the year • The cash flow statement would have a deduction from investing as new PPE is acquired but a net inflow in financing based on the new debt acquired • For the balance sheet assets will be up $100 due to the new PPE and the liabilities will be up $100 from the new debt

29. What would someone you have not gotten along with in the past say about you

• They would say that there are select cases when I stick behind my ideas to strong and have some trouble being persuaded • While I am a engaged listener, there are some cases where I feel as if my views are not being listened to, so I try different ways to explain my ideas which may come off as stubborn

12. When does an LBO transaction occur

• This is implemented when a firm uses a high amount of debt to finance an acquisition with the intent that the cash flows acquired by the company will help pay off parts of the debt over time • The hope is to have part of the debt paid off at the time that the company is wishing to exit their investment where they are paid a favorable price for the company that can be used to pay off all remaining debt leaving over a large sum for the company

52. How do companies select the bankers that they work with

• This is usually based on the quality of relationships banks are able to build • A stronger connection backed with incredible client servicing and solid reputation allows for clients to put their trust, and therefore their business, with the bank

58. What is a divestiture

• This is when a company will decide to sell a specific division of the company as opposed to selling the entire company • It is similar to the sell-side M&A process with some extra hurdles since you are dealing with only a part of a company • This makes the structure and valuation more complex as you have to create projection models for specific sectors of the company

65. Let's assume you are going to start a laundry machine business. How would you analyze whether it's viable

• To first determine if the laundry business will be viable you will have to determine if there is a real need for the usage of laundry machines on a regular basis o Location plays a large role because if you put your laundry business into an area where many people don't have laundry machines in their apartments or homes, there will be a continual need • Assuming that there is a relevant and recurring need, you next need to look at the upfront costs that are incurred with the business (machines, building, etc) and how much capital would need to be raised in order for these to be covered • You also need to look at recurring expenses like maintenance and utilities that you will incur over time

78. Why are we your first choice - Wouldn't you like London or New York more

• Varies by interview • I like the people that this city brings to it as their personality and energy are one of a kind • It is a place that I can see myself living in the long-term as it is the right area for me • Philly is a tight market in terms of investment banking, but that just means that I would be surrounded by people who love the city and are willing to compete to work there

104. Walk me through a $100 "bailout" of a company and how it affects the 3 statements

• What kind of Bail-out - clarify (equity, debt, or combo) • EQUITY - No change in the income statement. On the CFS, cash flow from financing goes up $100. For the balance sheet, assets go up by $100 due to the $100 increase in cash flows and the shareholders' equity goes up $100. • DEBT - No change in the income statement. On the CFS, cash flow from financing goes up $100. For the balance sheet, assets go up by $100 due to the $100 increase in cash flows and the long-term or short-term debt goes up $100 depending on the terms

105. Walk me through a $100 write-down of debt - as in OWED debt, a liability - on a company's balance sheet and how it affects the 3 statements

• When a liability is written down, there is a gain on the income statement. Pre-Tax income will go up by $100 due to the write-down and assumiong a 40% tax rate, net income will be up $60 • Net income being up $60 will be faced with an $100 decrease to cash flow from financing resulting in an overall $40 decrease • For the balance sheet, cash goes down $40 so assets are down $40 which is balanced by the $100 decrease in liabilities combined with $60 increase in retained earnings

3. Can you tell me about a time when you submitted a report with misspellings or grammatical mistakes

• When putting together emails during my PE internship at a search fund, we often put together emails in order to gain the interest of potential sellers with our firm • I accidently misspelled the name of a potential seller while drafting out the email and did not re-check before sending them to my principal • I realized after the matter and luckily the email had not gone out yet, so it left me enough time to reach out to the principal with the correct selling • I learned here that there is more to checking over work than using spell check and that I need to make sure to carefully go back and look through everything that I submit

70. I see you have no relevant finance experience - why should we hire you over someone who's had a previous banking internship

• While I don't have any current relevant finance experience, I believe that I possess the qualities that will make me successful in the field of investment banking • I am highly involved within my campus, from being a part of three clubs, participating in the demand of division I athletics, interning remotely at FinPro, and taking on learning projects and extra outside coursework while maintaining a 4.0, I can manage, as well as fill, my time with long hours and constant learning • Along with attempting to get the most out of my university experience, I believe that I possess the grit and determination that is not only desirable but required within the industry based on my will to desire more that I have been able to gain through running. As it is a perseverance sport, I have been able to teach myself discipline and have truly felt what it means to really want to attain my goals. Through that mindset, ever since I have found investment banking to be a career interest, I have spent countless hours everyday routinely checking in on markets, developing modeling and corpfin skills, networking with industry professionals, and developing myself to be a competitive candidate

14. Why did you major in Finance

• While I found a passion for accounting in high school, I wanted to do something beyond reporting or working in a corporate office • What I found myself more curious with was what could I do with the reported numbers. How could I use those accounting skills to forecast and create a work product that was more dynamic • Finance allows you to bundle accounting and economics, which are keen interests of mine, and truly understand what makes a business profitable within a market

76. That guy over there has a 4.0 from Wharton/Harvard - why should I hire you over him, given that you're much less impressive

• While I may not attend and Ivy League school, I still believe that I have the intelligence and ability to excel within the field of investment banking • I believe that having an early interest in accounting and finance has led me to know what I want which is why I have spent countless hours and large efforts in recruiting and networking for investment banking • Coming from a non-target position has made me value standing out and attacking any opportunity I may come by and it has shown me that I have the grit necessary to be successful • While the typical Ivy student may have the resources to get their foot in the door via on-campus recruiting, I know that I have the burning passion to do whatever it may take to get into investment banking

6. Have you ever worked on a project or report that was shown to a large number of people

• While in my first year of undergrad, we were tasked with three others to create a mock business plan for an idea that we came up with • The plan was centralized around a secure and trackable wallet. We created marketing materials along with a full plan to pitch to potential investors at the end of the semester • Through long hours of working on our investor pitch, we were able to present to a room with many of our classmates and alumni that evaluated our proposal and grilled us on different aspects of the plan • We were able to win an award for having the top business plan within our class

32. What is your greatest failure

• While running in high school, I had been getting too caught up in the increase in schoolwork my sophomore year that I hadn't been taking care of myself as much as I should have. I was getting 4-6 hours of sleep I night so that I could study for longer and I was not eating well • This caused me to have to drop out of one of the most important races of my lifetime only to be hospitalized with an iron deficiency that made me realize that there were no other options besides to take better care of myself • I really tried to work at my physical and mental health and was able to come back much stronger the following year, becoming All-State First Team my junior year and achieving a team state championship

33. What is a team project that you have worked on

• While working at Men's Wearhouse, they were in the midst of financial struggles and working to branch out and find new projects that could boost sales • I had the ability to assemble an internal team to start a new project within the business that worked to provide high schoolers a one-stop shop to order prom tuxedoes. • I was able to market the project and have a smooth execution process where I had brought in half of the students eligible to go to prom to attend the event which brought in over $8000 of revenue for the company

53. Walk me through a typical sell-side M&A deal

• Winning the mandate - creating the pitch, presenting that pitch, signing the necessary engagement letter, and calls with management to learn more about how the company operates • Marketing - receiving any initial documents, setting up the data room, and putting together and sending out the teaser with the NDA. If the potential buyer signs the NDA, they are allowed to receive a CIM • Indication of Interest (IOI) - potential buyers may come back with questions or requests for calls with management, but the information given is very limited until the IOI is submitted by buyers • Letter of Intent (LOI) - Starting with a few potential buyers submitting their IOIs and are given access to attend management presentations with potential site visits as well. A formal data room is set up by the bank and many potential buyers will have additional requests and will submit their LOIs • FDD and Closing - The bank will then select one buyer who will send the bank a detailed due diligence list to be completed. This is where the third-party advisors would come in (ACT, legal, etc) and run their own due diligence (quality of earnings, environmental assessments, benefits analysis, insurance analysis). One party will start drafting the purchase agreement and there will be discussion back and forth until the diligence process is done and the agreement is signed

108. What's the difference between accounts receivable and deferred revenue

• With deferred revenue, the cash has exchanged hands but with accounts receivable, that customer is yet to pay you for the service • AR is how much revenue the company is waiting on • Deferred revenue is how much is waiting to be recorded

94. Why is the Income Statement not affected by changes in Inventory

• With inventory, the asset is only expensed once it is sold • Inventory will decrease and COGS will go up when there is a sale - but is not an expense otherwise

59. If you had a 1-slide company profile for an investor. What would you put onto the slide

• With the header being the name of the company, the slide should be broken into four equal sections • The top left should be a company description with the management team listed • The top right should be stock performance, metrics, and consensus projections • The bottom left will have descriptions of products and customers • The bottom right would have the office/store locations on a map

101. What is working capital - How is it used

• Working capital is the equivalent to current assets minus current liabilities • Positive working capital means that the company can pay off short term liabilities using short-term assets while negative means the opposite • This can be used as a solid financial metric but some people will use operating working capital which is the same equation just with cash and debt taken out

77. Let's say your MD is meeting with a client and you have been invited. As he's presenting, you notice a mistake in the materials - do you point it out

• You should not point a mistake out unless it is brought up by someone else • In this case you should mention it briefly and move on in order to protect the reputation of the firm and the business of the client • Most likely no one will notice and it is best to move past it

88. Let's say I could only look at 2 statements to assess a company's prospects - which 2 would I use and why

• You would choose the income statement and balance sheet because from this, you should be able to build a cash flow statement given these statement in a two year period

60. Let's say you're hired as the financial advisor for a company. What value could you add for them if they ask you about their suggested growth / M&A strategy

• You would first want to see the growth perspectives and what they want for the future • As an advisor, I would try to match them with target companies that meet the operational synergies and market expansions they are looking for • I would assist them with growth by seeing if partnering, pursuing an M&A deal, or expanding organically with new products would be the right approach • You add value as an advisor by introducing them to potential targets and then helping them to pursue an ideal negotiation strategy 61. If you owned a small business and were approached by a larger company about an acquisition, how would you think about the offer, and how would you make a decision on what to do? • If I were being bought out, I would consider the premium paid, how that payment is funded, and what the future direction was going to look like • If approached by a strategic acquirer, I would hope for the company to add impactful synergies to the acquirer to make both parties more efficient • If approached by a financial acquirer, I would hope that current management teams could stay on in order to continue the success and innovation that would have helped me build this company • In terms of payment, I would want to sell in a time that the market was bullish for my specific industry as to acquire as high of a premium with positive growth potential