the nuts & bolts of investment banking: understanding key financial concepts andrea o’neal...
TRANSCRIPT
![Page 1: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/1.jpg)
The Nuts & Bolts of Investment Banking:Understanding Key Financial Concepts
Andrea O’Neal & Patrice MitchellInvestment Banking Program Managers
![Page 2: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/2.jpg)
Your Goals
• Become familiar with major methods of analysis used by investment bankers
• Build your vocabulary for investment banking concepts and jargon
• Have a foundation for using / understanding more complex resources
• Become more prepared for banking interviews
2
![Page 4: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/4.jpg)
Income Statement
• Summarizes revenue and expense streams related to business operations
• Used to evaluate health of company by determining profitability
• Snap shot of how efficiently company runs core operations
• Used as basis for future quarterly or annual projections in modeling
4
![Page 5: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/5.jpg)
Balance Sheet
• Summarizes assets, liabilities and shareholder equity (capital) of a company
• Used to assess capital structure and financial health – what company owns vs. owes
• Used in valuation methods to determine true worth of a company
5
![Page 6: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/6.jpg)
Statement of Cash Flows
• Summarizes sources and uses of company’s cash
• Cash categorized as operating, investing & financing
• Cash is lifeblood of company; used as basis for valuation (DCF)
6
![Page 7: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/7.jpg)
Commonly Used Terms & Ratios
7
![Page 8: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/8.jpg)
METHODS OF VALUATION
8
![Page 9: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/9.jpg)
Comparable Company Analysis
9
![Page 10: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/10.jpg)
Discounted Cash Flow Analysis
10
![Page 11: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/11.jpg)
Other Common Terms for Every Rock Star IB Intern
Analyst Top Responsibility Explanation“Valuation” – (i.e. Comparable Company Analysis (“Comps”), Discounted Cash Flow (DCF), Free Cash Flow (FCFF/FCFE) modeling
Financial analysis is at the heart of investment banking. Bankers build models to derive fair value of a company/asset based on several public, private and projected inputs
“Pitchbook / RFP” (Request for Proposal)
Presentation materials used for the purpose of attracting new clients or maintaining existing client relationships
“Live Deal” An active transaction where a client is pursuing a capital raising or M&A
“Roadshow” During a live deal, execs of the client may meet with prospective investors and sell the company’s unique investment story
“PIB” (Public Information Book) Compilation of a client’s publicly available information for banking teams’ internal use
“Prospectus” or “Red” Official deal document filed with the SEC 11
![Page 12: The Nuts & Bolts of Investment Banking: Understanding Key Financial Concepts Andrea O’Neal & Patrice Mitchell Investment Banking Program Managers](https://reader036.vdocuments.mx/reader036/viewer/2022062423/56649e9e5503460f94b9f7cb/html5/thumbnails/12.jpg)
Preparation ResourcesThere are several ways for students to increase their candidacy for IB internships:
Increase market & industry knowledge. Actively learn terms, read financial news & form a unique opinion (not just copycat sound bites) to demonstrate understanding Beef up on technical ability. Take accounting & finance courses; hone excel, quick math and critical thinking skills Gain practical experience. Join business/finance focused campus groups, take a leadership role to put skills in practice Understand personal strengths. Be able to identify type of banking role that is the best fit; be able to concisely summarize personal strengths, experiences and assets that align with a great candidate for banking 12