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Tag: Investment Banking

India’s Top Boutique Investment Banks And What They Are Looking For In New Hires.

Posted on by Imarticus Learning

Boutique investment banks are an evolution of investment banking based on the demand for a bouquet of services mainly by smaller enterprises and startups. Since the investment ceiling in this group is not tiny and extends to Rs 200Cr, many investment firms and banks find it an excellent opportunity to customize their services to cater to such clients. Firms like JP Morgan, JM Financial, Morgan Stanley and Goldman Sachs were quick to jump on to the bandwagon. In India, currently, a large number of opportunities have been thrown open by European firms like Merrill Lynch, Citigroup, BNP Paribas, Credit Suisse and Lehman Brothers outsourcing their requirements of investment banking.

What are Boutique Investment Banks?
The top-heavy banks with the highly paid large payouts and boards look at markets above the 100Cr Rs mark and charge a commission that could vary from 0.5 percent to about 2 percent of the deal values neglecting the markets below 100Cr as their demands seem exorbitant here.
A boutique services investment firm concentrates on the 10 to 100Cr segment offering them services like bank debt, fund-raising, private equity, advising on acquisitions, dealing with mergers, managing IPOs and customizing on services in between, while offering them the personalization of the large banks with better services thrown in.
Among the Indian firms who are worth watching and joining for a lucrative top-notch career are Veda Corp, Ripple Wave, MAPE, Cogence Advisors, Equirius Capital, and P2P who are giving the big banks a run for their money in the boutique banking sector. These firms are typically staffed by less than a hundred employees and offer great opportunities in the IB sector both in terms of payouts and career progression.
The job role:
To understand what these companies look for in the new hires, let us try to look at what exactly happens in an average investment banker’s workday. The task-list of an investment banker includes advising and pitching financial instruments to clients, helping with investment and funding decisions, and providing financial data to clear customer decisions.
The fun part lies in creating financial reports, reporting trends, making client presentations, garnering foresight, researching case studies and more. Client facing tasks like issuances and debt-portfolio management is challenging and exciting.
The career progression:
Doing an IB course reiterates that investment banking is about setting and selling the right expectations. You will probably progress up the ladder quickly, enjoy high bonuses and payouts linked to the deal values, and would need every bit of the best financial training and skills to handle the stress and heat that will last through work hours like 100 to 180 hours a week being considered part of the job.
The usual hierarchy of job roles is as given below –

  • Undergraduates spend up to 2 to 3 years as an FA learning on the job.
  • The graduates joining as IB Associates depending on their specialization or those with actual work experience and classroom.
    training spend about 3-4 years learning and practicing their role.
  • VP- Investment Banking based on performances and value-adds to the organization being the next progressive step.
  • Director-IB, which is a management and decision-making high strategy role.
  • CFO, MD and such who anchor and are at the helm of the management team.

The essential traits required:
Investment banking calls for requisite skills in analytical, quantitative and commercial awareness coupled with the banker using his/her persona, discipline, and financial integrity while remaining calm and stress-free through a punishing day. Many of the finance, law and economics graduates who do a skill-building investment banking course at Imarticus Learning benefit from a comprehensive curriculum and excellent soft-skills training by being placed as Associates directly under their assured placement programs.
Remember that according to Payscale chart below, the investment banker’s payouts are among the best.
Any employer would also want people with these attributes.

  • Certifications are worth their weight in terms of measurable skills.
  • Proficiency in Excel techniques, PowerPoint presentations, an excellent foundation in accounting and finance and the MS Office and Word suites.
  • Counting as an effective team member.
  • Being an effective organizer.
  • Being always in the learning mode.
  • Excellent skills in financial modeling.

Concluding notes:

The total payouts in investment banking are proportional to your skills, hard work, and basic training. Your performance and bonuses will depend on your work. Join the investment banking course at Imarticus Learning to hone your financial suite of skills and take advantage of their soft skills modules. A measurable global certification which endorses your practical skills is highly sought after as real-life experience and preferred by many employers.
Wishing you all success in your career! For more information in brief and for further career counseling, you can also search for – Imarticus Learning and can drop your query by filling up a simple form or can contact us through the Live Chat Support system or can even visit one of our training centers based in – Mumbai, Thane, Pune, Chennai, Banglore, Hyderabad, Delhi, Gurgaon, and Ahmedabad.

What is The Best Way To Start A Career in Investment Banking?

Posted on by Imarticus Learning

While it is no secret that Investment Banking has forever been, one of the most alluring fields, especially with the sophistication and grace that stock exchange and the Wall Street have both gathered, in the recent few years.
To begin with, we should perhaps be clear about what Investment Banking is.

For instance, not everyone who works for Goldman Sachs or Edelweiss is an Investment Banker engaging in Investment Banking.

Investment banking roles can also be found across different types of companies. While the most popular investment banking jobs are found at Bulge Bracket Investment Banks like JP Morgan and Morgan Stanley, they can also be found in the Investment Banking units of commercial banks like ICICI Bank and Citibank.

They are also found in smaller regional firms like Avendus Capital and Jeffries or more sector focused banks like Piper Jaffray. These are often called Boutique Banks in India and middle-market banks around the globe.

Also Read : How Do I Get Into Investment Banking?
Investment Banking jobs can also be found in large private Equity institutions like Blackstone. But an area a lot of people completely ignore is similar Investment Banking career paths at corporate firms like Reliance and Mahindra & Mahindra, large Multinational companies that engage in large amounts of fundraising, restructuring and, M&A. Many of these companies have in-house Investment Banking units.

This is the reason why you’d find almost everyone quoting some of the other famous investment related movie. Investment banking as a field branches out to various subfields, which include corporate finance, wealth management and mergers and acquisitions to name a few. Of these, mergers and acquisitions have gone on to become one of the most sought-after fields, in terms of career choices.

A lot of M&A aspirants are more often than not, on the lookout for getting thoroughly trained so as to master this amazing field. This is why a lot of candidates. Imarticus Learning, which offers excellent industry endorsed, specialization programs on subjects like Corporate Finance, M&A, Valuation, Financial Modelling, Operations and so on.

While getting professionally trained is extremely important, when it comes to pursuing a career in Investment Banking, it is equally important supplement your knowledge with the help of books.

Here’s a list of some of the best books and movies about Investment Banking, which would serve novices as well as professionals, very perfectly.

Intelligent Investor

The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing. The Intelligent Investor also marks a significant deviation to stock selection from Graham’s earlier works, such as Security Analysis. Graham’s philosophy of “value investing” – which shields investors from substantial error and teaches them to develop long-term strategies – has made The Intelligent Investor the stock market bible ever since its original publication in 1949.

Barbarians at the Gate

The Fall of RJR Nabisco is a book about the leveraged buyout (LBO) of RJR Nabisco, written by investigative journalists Bryan Burrough and John Helyar. The battle for the control of RJR Nabisco in the Autumn of 1988, which became the largest and most dramatic corporate takeover in American history, sent shock-waves through the international business world and became a symbol of the greed, excess and egotism of the eighties. Twenty years on, the world is once again recovering from a period of financial extravagance and irresponsibility.

The Rules were simple:
Never Pay in Cash
Never Tell the Truth
Never Play by the Rules

Rogue Trader (film)

Rogue Trader is a 1999 British biographical drama film written and directed by James Dearden in which we get the insights of the maker-checker concept of Investment Banking operations. The film centres in the life of former derivatives broker and the 1995 collapse of Barings Bank. It was based on Leeson’s 1996 book Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World.

The Big Short (film) is a 2015 American biographical film, based on the 2010 book The Big Short

Inside the Doomsday Machine by Michael Lewis about the financial crisis of 2007–2008 which was triggered by the United States housing bubble.

Related Article : The Difference between Investment Banking And Equity Research

Career and Scope in Investment banking Courses

Posted on by Imarticus Learning

Investment banking course is an emerging field in the country and it required skilled and trained professionals to meet the growing demands of the industry. Banks are the center of the global economy and investment bankers are the key to structuring the financial deals that manage business operations and keep the economy moving and growing. For this reason, institutes have introduced different investment banking courses across the country. There are many institutes in Mumbai which offers investment banking courses to students. To enter this field an aspirant should be skilled, thoroughly aware of the financial sector, accounting or legal issues and other matters. To attain this level of knowledge aspirants must know all business tricks well and must acquire a professional specialised course in this sector.

List of Financial and Banking Courses in Bangalore

Investment Banking Courses in India

To become an investment banker a candidate is required to perform different duties consisting of stock and bond trading, endorsement of securities, broker-dealer operations management and facilitation of mergers and acquisitions. Professionals of this field may also require to give financial advice to their clients on securities price, issuing methods and portfolio management. All these functions need highly skilled professionals with vast knowledge of the field. Aspirants can pursue a full-time course in Investment Banking. The duration of the courses may vary, a student can pursue this course at the undergraduate level, postgraduate level, and research level as well. There are many institutes across the country which offer full-time diploma and certificate courses in the field and the duration of these courses can be six months to two years, which depends upon the level of the course. Some popular investment banking courses are Investment Banking & Equity Research, Under Graduate Program in Security Analysis, Portfolio Management & Investment Banking and Post Graduate Program in Security Analysis, Portfolio Management & Investment Banking.

Investment Banking Course Eligibility Criteria:

Aspirants can get admission in investment banking courses at undergraduate, postgraduate and research level. Aspirants can also pursue certification and diploma level courses from investment banking institutes. To get admission in these courses the minimum eligibility criteria for undergraduate programme is candidate must have completed class 10+2 from a recognised board. For entry in postgraduate level, one must have done Bachelor’s degree from a recognised university in the relevant field.

Scope in Investment Banking
Investment banking sector in the country offers unmatched career opportunities to aspiring candidates. Candidates can explore their options in Corporate Finance, Capital Market, Project Finance, Mergers and Acquisitions, Rating Analysis, Equity and Fixed Income Research and Retail Brokerage/stockbroker/Private Client Coverage among others.

Salary Offered
A fresher of this field can get a salary somewhere around Rs. 20,000 to Rs. 30,000 per month, in the field of investment banking. Those who have some year’s experience as an investment banker can get higher remuneration in this field.
Check out More career Option with Investment Banking Courses in India. 

 

How Does an Investment Bank Work?

Posted on by Imarticus Learning

What is an Investment Bank?

Investment banks are special divisions in the banking sector that specializes in providing advisory-based financial services to help their client with large scale financial transactions. It leverages its large network and financial expertise to raise capital for its clients who are generally large corporations or high net worth individuals. From a broader perspective, investment banks play a major role in effectively channeling funds in the economy by connecting the borrowers and lenders.

The investment banks act as mediators in large-scale complex financial transactions to ensure that their clients get a fair share in the deal and remove any anomalies in the process. Investment banks are popular for providing their financial expertise to companies raising funds from the public through IPOs. In addition to valuing the company and finalising the stock price, the investment banks also act as underwriters in most cases and hedge the risk for companies to some extent.

Functions of an Investment Bank

Let’s understand the functions of an investment bank in the context of the work carried out by it.

  1. Initial Public Offering: Investment banks play a key role in assisting the Initial Public Offerings (IPOs). They help new organisations with good potential to raise funds from the public by offering their shares through IPOs. Investment banks have a major role to play when it comes to deciding the optimum share price by valuing the company based on their revenue and profits. Investment banks have to conduct all the due diligence and research work to find out the financial standing of the business and provide a fair valuation.
  2. Mergers & Acquisitions: Another important role played by investment banks can be highlighted in the mergers and acquisition deals. Mergers and acquisitions are fruitful for companies who want to reduce the competition and profit collectively from improved synergy. Mergers and acquisition can also help companies to venture into new markets and serve new customers. It helps them leverage the network, customer base and expertise of the other companies and benefit from it. The mergers and acquisition process requires a fair valuation of the companies being acquired or those who are acquiring. Investment banks act as a mediator in the merger and acquisition deals to ensure that their client’s interest is being protected.
  3. Advisory services: Another major function of an investment bank includes providing investment guidance to its clients. Investment banks work with big corporations and high net worth individuals and guide them on profitable investment opportunities. Generally, those investments are a little complex in nature and need professional guidance and oversight to reap profits. This includes alternative investments such as private equity, venture capitals, hedge funds, commodities, etc. Investment banks provide various advisory related services to their clients that help them improve their financial decision making.
  4. Market Making: Investment banks functions are generally categorised under two divisions; the advisory related services and the financing related ones. Apart from this, the investment banks also have a sales and trading division that serves the purpose of market-making. Selling and buying stocks on the exchanges also involve investment banks and they act as middlemen in the process. They buy and sell stocks frequently on the secondary exchanges whenever someone is looking to sell or buy stocks. This is why they are also responsible for market making.

The investment banking career is one of the most prestigious ones in the financial services industry and there are many who work hard to be successful investment bankers. Working in investment banking requires a lot of dedication and perseverance, you need to put in extra hours and do the job. Getting into the investment banking industry can be even harder, you can opt for an Investment banking course by reputed institutions like Imarticus Learning to boost your career prospects as it even guarantees job assurance with top-notch companies in addition to providing you with the required knowledge and skills.

Also Read: What are the Best Investment Bank to Work For

Top Investment Banking Trends To Watch In 2021

Investment Banking Current & Future Challenges & Changes

Posted on by Imarticus Learning

Regulatory Challenges

IFRS 9 is an international standard set by the International Accounting Standards Board (IASB) which focuses on financial instruments. It is a complete set of requirements and constraints which are to be met by the banks. This results in a lot of complexity and adjustments for investment bankers. The international regulatory organization BASEL has also increased the minimum capital requirements for banks from 2% in BASEL II to 4.5% in BASEL III. These adjustments sometimes come harsh on the banking sector and change the business behaviour of many financial institutions.

Cross-selling

Investment banks are required to collect information on their clients and measure their satisfaction level. In this era of competition, banks have to come up with new services every now and then for their existing clients in order to plant the seed of loyalty in their clients. In order to remain competitive, there is a lot of diversity in the services offered by the banks. To manage the needs of all the clients and then coming with new services accordingly is a tedious job and a challenge in the investment banking sector.

Profitability issues

The introduction of BASEL III has hampered the product profitability a lot. These shifts and changes also affect the structured derivatives and profit or return of equity (ROE). Banks have to constantly dig into their system and find out the loopholes and have to get rid of unprofitable transactions and services. The capital management has to be accurate as we all say ‘Capital is scarce’.

Cross border activities

Many financial institutions are known for providing services globally, global banking is a trillion-dollar industry in the current era. But these cross-border activities are not easy. You must have heard about the disadvantages of recently famous cryptocurrency Bitcoin. Blockchain is another method used for cross border payments but its trustworthiness is always questioned. There is always vulnerability from theft and fraud. Also, major disruptions and changes come to end investment banking because of cross border activities. A good investment banker needs to adapt and cope up with these changes.

Cost optimisation

The governmental formalities and laws are to be followed very strictly by the financial institutions. The recent laws and the ROE hits have forced bankers to optimise their production costs. The cost of services that are to be offered to the clients must not end in loss. Investment bankers have to do risk analysis and cost management.

Increase in Digital banking

Digital banking is growing more than ever. To transform and adapt to this pace is very important for the banks.

Cybersecurity

There are various types of cyber-attacks and the financial institutions are always vulnerable to such theft and fraud. There must be strict network security algorithms installed in the bank servers. If the banks have to transform in this era of digitisation, they have to cope up with the flaws.

Non-cleared derivatives

Banks have to settle all the derivatives in order to sustain. But the collateral damage suffered by the financial institutions makes it even tougher to deal with such unsettled derivatives. They have to implement a standard model to deal with OTC derivatives, this model should be proposed in such a way that it helps in identifying disruptions and helps in dealing with collateral damage.

Conclusion

You must have heard about the foreign financial institutions catching the ‘Fintech Fever’. Often, we can hear owners of foreign banks saying it is a threat to centralised banking. They have to cope up with all these cross-border activities and disruptions. Ranging from inflation to cyber threats, there are a lot of challenges faced by the investment bankers. In India too, these challenges are faced by the investment banking sector. But then again, the investment banking sector is very profitable if managed well. A good investment banker must know the ways of dealing with these challenges. This article was all about current and future challenges and changes in the investment banking sector.

Also Read: Misconceptions About Investment Banking

What is the Difference Between Working in a Private Equity and an Investment bank?

Posted on by Imarticus Learning

An Investment bank is responsible for raising capital and assists its clients in making financial decisions. They help businesses to raise capital via investment from investors. Private equity also helps in raising capital but it is different from an Investment bank in many ways. Both these fields are concerned with the shares of any particular firm/company but their working methodology is different from one another. The professionals who work in both these sectors also have a different working approach. Read on to know more about the differences between working in private equity and an Investment bank.

Difference between Private Equity and an Investment bank

The major differences are as follows:

  • Investment banks provide investment opportunities to their clients but they never buy shares in their client’s business. They assist their clients in raising capital but are never involved in the business whereas if you are working in private equity, you will try to buy a stake in your client’s business. Private equity is fully involved in the client’s business. You can say that besides assisting in raising capital as Investment banks do, they are also an investor for their clients.
  • An Investment bank can help its clients in generating capital and this process can go till the client is satisfied with the bank’s services. In the case of private equity, you will try to buy an underperforming company and then make it successful and quickly sell your stake to some other stakeholder and exit from that company. They try to buy a stake at lower prices and sell it at higher prices.
  • An Investment bank knows the revenue it has to generate for its client in advance whereas if you are working in private equity, there is no limit up to how much you can increase the value of your stake. Private equity also shares their client’s profit as they are also stakeholders in that particular company. Mostly, private equity receives its profit share in dividends.
  • The target investors of private equity are generally UHNWI (Ultra-High Net-Worth Individuals) for investing in ventures whereas an Investment bank generally provides its services to all types of companies/firms ranging from mid-level companies to high-level companies.
  • The analysis of clients, market structure, etc. done in the Investment banks is more detailed and critical because they have to identify the risk associated with any client. On a contrary note, private equity does data analysis only to find out about the trends and potential investors. There is not much risk associated with their clients as they mostly work with UHNWI clients who can manage themselves pretty well.

Working Culture of Employees in an Investment bank and a Private Equity

An Investment bank has a workforce consisting of analysts, consultants, etc. who are larger in number as compared to the number of workers in private equity. Private equity works with a limited number of employees and has fewer working hours as compared to an Investment bank. The employees in Investment banks have fixed salaries but the employees in private equity are also involved in the business and many times get a small percent of the share of any particular venture where their firm is investing.

One can choose any of the aforementioned fields according to their interests. The skills required are almost the same in both of these sectors. You need to have more negotiation skills for working in private equity and if you are working in Investment banking, you need to have an analytical approach. To learn more about the working methodology, one can take up Investment banking courses available on the internet.

Also Read: Difference Between Investment Banking and Corporate Finance

Top Investment Banking Trends To Watch In 2021

What Are The Best Investment Bank To Work For

How is The Life of an Investment Banker in India

Posted on by Imarticus Learning

A career in investment banking has always been the dream job for thousands of Indians, and since 2017, as the influx of foreign investment in India has increased, more professionals than ever before want to build a stable career in this industry.

The life of an investment banker has been broken down and displayed on the big screens many times over, but for those of us in India, who want a homegrown career in investment banking, what does life look like?

Thus in today’s blog post, we will share with you how the life of an investment banker in India looks like. Let’s get started.

The Work-Life

Since investment banking is one of the most sought after careers in both India and around the world, it comes as no surprise that it naturally calls for a stressful and hectic life, which is adequately rewarded by a financially fulfilling career. When you just start out in the industry after completing your investment banking certification, you need to typically go through an adjustment period which can last anywhere from a couple of months to a year, depending on your accuracy and speed at which you manage multiple tasks, while at the same time, learn the necessary skills which are necessary to finish the job.

During this adjustment period, you will be typically working as an analyst or researcher under an investment banker, and this will give you the incredible opportunity of experiencing at close quarters, what the life of an investment banker looks like. Along with this, you will also get the opportunity to better evaluate your strengths and weaknesses and understand if this is the right career path for you, considering the hectic work schedule and long hours.

Andrew Gutmann, a former investment banker, wrote in his book “How to Be an Investment Banker: Recruiting, Interviewing, and Landing the Job,” that the typical working hours of a new investment banker ranges from 80 to 100 hours a week and every day starts at 10 am and can go until 2 am at night.

Your Role as an Investment Banker

Now that you have a fair sense of what the life of an investment banker looks like let us better understand what role you will be playing as an investment banker. In simple terms, the role of an investment banker can be understood as being the mediator between companies and the money they need. For example, if a large company is planning a merger, investment bankers are hired or if a young company is planning to go public, investment bankers are hired.

Therefore any organizational level transaction, which will include a transfer of high net worth assets, liabilities, and cash, will require the intervention of an investment banker.

While this is a general out mark of the clientele you will be working with, depending on the company you choose to work for, the clientele may vary as each organization has its core expertise and experience.

The capital markets are a very high paced and high stakes industry, where both the risk and the reward is very high. Although these markets are highly regulated and overwatched, one needs the expertise of a professional to navigate this market, and these professionals are known as investment bankers.

Conclusion

Life in the day of an investment banker in India can comprise all kinds of tasks starting from meeting new clients to preparing offers and all the way to creating sales projections and preparing pitchbooks.

It’s a fast-paced industry, so put on your seatbelts and get ready.

Also Read: What is Investment Banker

Why a short professional program is better than an MBA?

Posted on by Imarticus Learning

By Reshma Krishnan
Over 50 percent of the students that come to Imarticus Learning and attend our FMVC, CIBOP, CIBIT programs are MBA students. During their counseling sessions as well as their interview prep and mock interviews, we always ask them what they learnt in their MBA and what made them attend Imarticus.

The answers are always the same – I learnt nothing in my MBA. Why is that? MBA’s are extremely popular, so why are they so futile? It’s not the MBA that is futile. The right MBA done at the right time and from the right school is useful, but the majority of MBA’s are not well designed. Here are our top reasons for why short professional programs are better than an MBA.

What is an MBA? An MBA is a multi disciplinary course of study that helps you understand the various facets of running a business, ergo the name, a master of business administration. An MBA assumes that you have come far enough in your career to put the theories you learn during the course– marketing, finance, and operations, into some sort of context. A context that cannot be built without some understanding of how a business functions.

MBA’s are useful but only to those who come in with 5-6 years of relevant work experience. Having already worked on a shop floor of a store or coded for a company, they do an MBA to understand the other facets, which they can then apply to their experience.

This is what generally happens abroad. In India however, the stress on academics and degrees mean that most people do an MBA right after college without any experience leading to a two-year course of study that adds no value, not even to the resume.

But then, you ask, how do we stand out against others during a job hunt? You stand out by doing a course that is tailor-made where the curriculum has been designed in conjunction with specialists and endorsed by companies. A short course does not expect you to have work experience and it’s sole purpose is to help you find a job, and it does that by training you specifically for a role which makes you more employable as you are able to add value to a company from day one.

1. Short professional programs are job-specific – all our programs have been designed by industry experts and tailor made to job requirements. For instance the CIBOP program is designed for Investment Banking Operations roles. For three months, you will be taught by domain specialists, who have worked in these roles giving you real life examples.

2. Professional programs are shorter – Because you spend only three months, you start working sooner and spend less time in the classroom and more time gaining valuable work experience that you can then use to apply to a more prestigious and useful MBA program

3. Short programs focus on getting you a job– our short programs are tailored to a job, which attracts companies because they know our candidates are job-ready.

Imarticus Learning offers the internationally-accredited CIBOP program, designed for careers in Investment Banking. This program provides you an in-depth understanding of complex financial products and their Trade Lifecycles, along with Operational Risk and Regulations.

Top 20 Investment Banking Interview Question and Answer!

Posted on by Imarticus Learning

Investment banking has been one of the most lucrative career prospects for people aspiring to make a career in finance. Naturally, this invites a lot of competition and you need to stand out from the competition to be a part of any successful investment banking firm.

Investment Banking analyst

Investment banking training programs and courses can help you provide an extra edge by imparting a comprehensive understanding of the Investment banking industry. It also helps to provide a practical understanding of the field and how things work in the investment banking industry.

Here is a list of top 20 investment banking interview questions and answers to help you with your interview process for investment banking placements.

Q1. What are the three most important financial statements? Briefly explain their significance.

The three most important financial statements are the balance sheet, cash flow statement, and income statement. All these three financial statements help to understand and evaluate the financial standpoint of the organization. The income statement depicts the revenue and expenses of the firm and also shows the net income for a given period.

The balance sheet helps to compare the assets and liabilities of the business which are explained and categorized in detail in a balance sheet. The cash flow statement only tracks the cash transactions and focuses on cash flow from investing, operating, and financing activities.

Q2. What is the difference between cash-based accounting and accrual accounting methods?

The main difference between the cash-based and accrual accounting method is in the timing of the transactions recorded. Accrual basis account updates books as and when revenue or expenses occurs. In the case of the cash-based accounting method, revenue and expenses are recorded only when there is a cash inflow or outflow for a given transaction.

Q3. How do you calculate the weighted average cost of capital?

The weighted average cost of capital can be calculated using the following formula.
WACC = Cost of equity*Proportion of equity + Cost of debt*Proportion of debt (1-tax free rate)
It basically measures the percentage of the company’s capital taken up by each capital component and takes out an average weighted cost.

Q4. Let there be two companies X and Y. X have only equity capital and Y has a combination of debt and equity capital. Which of the two companies will have a higher weighted average cost of capital?

In this case, company X will have a higher weighted average cost of capital as the cost of debt capital is cheaper than the cost of equity capital.

Q5. Can you mention some of the mainstream methods that are used to value a company?
Some of the most commonly used valuation methods to compute a company’s value are the Discounted cash flow analysis method, the Precedent transaction analysis method, and the Comparable company analysis method.

Q6. Can you explain the discounted cash-flow analysis method?
The discounted cash flow analysis method takes into account the future cash flows of a business and calculated the present value based on that. The future cash flow projections are determined, a discount rate is set and the present value of the company is calculated on that basis.

Q7. Name some of the common multiples or ratios that are used in the valuation process.
Some of the commonly used multiples or ratios for the valuation process are listed below.
• Price/Equity
• Price/Book Value
• EV/EBIT
• EV/Revenue
• EV/EBITDA

Q8. Explain the concept of Leveraged Buyout?
A Leveraged Buyout occurs when an investor or a Company decides to use borrowed money to acquire another firm. The asset of the company being acquired is used as collateral for these borrowed funds.

Q9. How do you calculate the enterprise value?
The enterprise value can be easily calculated using the formula mentioned below.
Enterprise Value = Market value of equity + + minority interest + debt + preferred stock – cash amount.

Q10. What does a negative enterprise value signify?
A company can have a negative enterprise value in three of the following scenarios:
• Low market capitalization
• Large cash balance
• Both

Q11. How does revenue synergy benefit companies?
Revenue synergies can benefits companies by helping them cross-sell products to a new customer base and also to sell new products to customers. It helps companies to efficiently expand across new geographies and locations.

Q12. Explain the process of goodwill creation in an acquisition?
The goodwill of any organization is a mixture of brand name, intellectual property rights, customer relationship, etc. It signifies the additional value over the fair market value of an organization. During an acquisition, the company has access to all the intangible and tangible asset of the other organization including their goodwill generate.

Q13. What are the contents of a pitch book?
The contents of a pitch book are subjective and contingent upon the type of deal the company is pitching for; some of the common content includes the following:
• Bank credentials to prove competency in the deal
• List of the firm’s options
• Appropriate financial models and valuation methods
• Financial carts and other relevant data
• Potential acquisition target companies
• Key recommendations and summary of the pitch

Q14. What do you understand by convexity in the yield context?
Convexity measures the relationship between the yield and price variations in bonds in relation to changes in interest rate. It is used as a risk calculation strategy because it shows how a bond yield will respond to changes in the interest rate.

Q15. Why do private equity firms use leverage while buying companies?
TO finance the purchase price of a company and reduce the equity amount to process the deal, leverage or debt is used by private equity firms. It will eventually lead to an increase in the firm’s rate of return.

Q16. Explain beta in context to risk.
Beta helps to assess the degree of an asset’s non-diversifiable (systematic) risk. For example, if a company’s beta value is equal to 1 then it is considered as risky as the overall stock market and will reflect the same level of loss and gains.

Q17. How to value firms that have negative historical cash flow data?
An appropriate method to value firms with negative historical cash flow data is by using the Discounted Cash Flow Method.

Q18. What do you understand by Monetary Policy?
Monetary policy can be explained as a method used by the central bank of the nation to control the flow of money in the economy. The interest rate is used as a tool to control the supply of money and achieve desirable output for macroeconomic gains.

Q19. When is a deferred tax asset created?
A deferred tax asset situation arises when a company has paid more tax to the taxation authority than it has shown on the income statement.

Q20. What drives you to be an investment banker?
A subjective answer is required here.

We offer investment banking courses at our centers in Mumbai, Thane, Pune, Jaipur, Delhi, Gurgaon, Bangalore, Chennai, Hyderabad, Coimbatore.

How to Succeed as an Analyst in Investment Banking

Posted on by Imarticus Learning

Investment Banking is not just about horsepower, if it was then the smartest people in the room would be PhD holders. Most successful Investment Bankers are not CA’s and neither are they CFA’s. Most Investment Banking analysts around the world are armed with degrees in History and Philosophy and often law because most Analysts are graduates fresh out of university. So what does it take for an Analyst to perform successfully during the first crucial three years?

Hard work

This is a given but after three years of doing a Bcom where you skipped classes and had weekends to yourself, 90 hour weeks can be hard especially if you’ve never done finance before. Most Investment Banks are happy to have you learn on the job but that means doing it on your own time. So while you spend your days building tables, research companies and filling up power point templates, you need to spend your after hours, think skipping that episode of Suits and take out your Damodaran on Valuation.

Investment Banking does not allow for weekends or free time during your first two to three years. You are wedded to your job. That means getting in at 9 am and working till 8 pm after which you’re probably going to have to come back to work on Saturday and Sunday to finish that pitch if you want a coveted bonus.

But beware of face time. Staying in and playing brick breaker at work won’t score you any points primarily because it’s very unlikely you’ve finished everything you need to do. There’s always something more to do in IB. The financial analyst prodegree program is an intensive program that prepares you for the harsh reality of Investment Banking.

Deadlines: Getting stuff done on time is something we have noticed students find very hard to do because they are not used to doing assignments. They think extensions are permissible. There are no extensions in Investment Banking or Equity Research because a meeting or stock calls cannot be postponed. The financial analysis prodegree ensures that assignments have strict deadlines through our state of the art Learning Management System.

Groupwork: for many of you, this will be the first time you work in groups and have to put up with someone else’s style of working. A team will always create better work than an individual because it has the added advantage of multiple inputs, which get validated by your peers, and it also ensures that mistakes are caught at various levels. But group work also means working your leadership skills, learning to delegate, learning to accept someone else’s weaknesses and bringing the best out in the team.

It can also mean learning to work with someone who doesn’t pull his or her weight. This is a common interview question. How would you deal with a team member not working on their deliverables? The Imarticus School of Investment Banking prepares you for group work since almost 40 percent of the course is group work which means you work with people who live 2 hours away from you and come from different backgrounds.

You learn to work in coffee shops and crowded environments and realize that working in a group is much better than working alone.

While the financial analysis prodegree program prepares you for Investment Banking by equipping you with technical skills such as Financial Modeling, Pitch Book making as well as Financial Analysis training, we also focus on developing your soft skills, which include Business communication skills, group work and Interview Preparation.
So to boost to your career in finance and enroll now!