Suggested Certification for Investment Banker

CISI Level 4 Certificate in Investment Management

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Interview Questions and Answers

Synergy refers to the idea that the combined value of two companies after a merger or acquisition is greater than the sum of their individual values. This can result from cost savings, revenue enhancements, or other efficiencies.

Recent trends might include increased activity in specific sectors, cross-border deals, private equity involvement, and the impact of regulatory changes.

Term loans are loans with a fixed repayment schedule. Revolving credit facilities allow borrowers to draw down and repay funds as needed. High-yield bonds are bonds with a higher risk of default and, therefore, offer higher yields.

Ethical considerations include maintaining confidentiality, avoiding conflicts of interest, providing objective advice, and complying with all applicable laws and regulations.

By reading financial news publications (e.g., Wall Street Journal, Financial Times, Bloomberg), attending industry conferences, and networking with other professionals.

This requires a personal anecdote demonstrating your ability to prioritize tasks, manage your time effectively, and remain calm under stress. Highlight the positive outcome and lessons learned.

Debt financing can be cheaper than equity financing (due to tax deductibility of interest), but it increases financial risk. Equity financing doesnt require regular payments but dilutes ownership and can be more expensive.

A fairness opinion is an independent assessment of the fairness of a transactions terms from a financial point of view. Its important to protect the interests of shareholders and ensure that the deal is in their best interests.

Bankers in restructuring advise distressed companies on options such as bankruptcy, debt restructuring, or asset sales to regain financial stability.

The main financial statements are the income statement, balance sheet, and cash flow statement. The income statement shows a companys profitability over a period of time. The balance sheet shows a companys assets, liabilities, and equity at a specific point in time. The cash flow statement shows the movement of cash into and out of a company over a period of time.

WACC (Weighted Average Cost of Capital) is the average rate of return a company is expected to pay to finance its assets. Its calculated by weighting the cost of equity and the cost of debt by their respective proportions in the companys capital structure.

Investment banking is a branch of banking that specializes on assisting individuals and businesses in raising funds and providing financial advice.

Investment Banking Division (IBD).

DCF analysis, Comparable company analysis, and Precedent transactions.

A DCF model is a specific type of financial modeling tool used to value a business. DCF stands for Discounted Cash Flow. A DCF model is basically a forecast of a company's unlevered free cash flow discounted down to today's value, also known as Net Present Value (NPV).

Analytical thinking.

Communication.

Innovation.

Resilience.

International outlook.

Leadership experience.

Confidence with numbers.

The experience and exposure to financial modeling. Help others discover the best ways to get substantial returns on their nest eggs, and in helping businesses buy other businesses.

Working capital: Working capital is the capital/funds required for daytoday operations of the business. It is the amount of cash a business can safely spend. It's commonly defined as current assets minus current liabilities.

Weighted Average Cost of Capital: The weighted average cost of capital(WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital.

Money laundering: Money laundering is the process of changing large amounts of money obtained from crimes, such as drug trafficking, into origination from a legitimate source. It is a crime in many jurisdictions with varying definitions.

Enterprise Value: Enterprise value (EV) is a metric for a company's entire worth that is sometimes used as a more comprehensive alternative to market capitalization. Enterprise value takes into account not only a company's market capitalization, but also short and longterm debt, as well as any cash on the balance sheet.

Capital Asset Pricing Model: The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks.

deferred tax asset:- An item on the balance sheet arising from and overpayment or advance payment of taxes is a deferred tax asset. It is the opposite of a deferred tax liability, which represents income taxes owed.

- fairness opinion:- A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair.

- Beta:- Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole.

- M&A:- mergers and acquisitions (M&A). Bankers who work in M&A investment banking advise firms on how to sell themselves to buyers, acquire smaller companies (targets), and divest or acquire certain divisions or assets from other businesses.

- SWAP:- A swap is a derivative-based transaction in which two parties are permitted to exchange cash flows and liabilities from multiple fiscal instruments.

- leveraged buyout:- A leveraged buyout is one company's acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

- equity value:- The equity value (or net asset value) is the value that remains for the shareholders after any debts have been paid off.

- goodwill:- Goodwill is an intangible asset associated with one company being acquired by another. In particular, goodwill is the percentage of the purchase price of all the properties acquired in the transaction and the liabilities assumed in the process that is greater than the amount of the net fair value.

- monetary policy:- Monetary policy refers to the steps taken by a country's central bank to control the money supply for economic stability.

Investment banking specializes in buying and selling bonds and stocks for firms, as well as assisting them with initial public offerings (IPOs), whereas commercial banks generally deal with deposits and loans for companies and individuals.

Companies merge to expand their market share, diversify products, reduce risk and competition, and increase profits.

Historical results and assumptions.

Start and complete income statement and balance sheet.

Build the supporting schedules.

Build the cash flow statement.

Perform the DCF analysis.

Add sensitivity analysis and scenarios.

The most significant distinction between accrual and cash basis accounting is the timing of revenue and expense recognition. The cash method recognizes revenue and expenses more quickly, whereas the accrual method focuses on anticipated revenue and expenses.

DCF analysis, Comparable company analysis, Precedent transactions.

Concerns like politics that come along with the business world, balance between work life and family life, and managing someone else money.

Sales and Trading, Corporate Finance (Investment Banking), and Research of Equity and other Instruments.

Tally the value of assets Add up the value of everything the business owns, including all equipment and inventory.

Base it on revenue.

DCF analysis.

Comparable company analysis.

Precedent transactions.

Use earnings multiples.

Do a discounted cashflow analysis.

Go beyond financial formulas.