bosh

do you need to actually know all these financial things and macro knowledge for the actual job?

@@hasanaslam931 yes of course

yes@@hasanaslam931

yeah, and this was pretty basic@@hasanaslam931

😂😂😂😂😂

It's actually a great question, it's the one topic in which most of us will shit our pants if they start going into greater depths. But thankfully, they never do.

CAPM

@@jai7961 I just got this question the other day and was frozen.

Dividend growth too

u work in credit risk buddy 😂😂 none of these questions are einstein level math formulas they're formulas based on financial intuition. knowing these answers is moreso just a signal that you know basic financial shit. i garuntee you ibankers will remember free cash flow formulas until they die.

U make good money?

@@goldtax8447 it could always be better, but my lifestyle is much more preferable than an office monkey, which I was a decade ago. In 2024 I will start to do LBOs. So will need to galvanise some of these young cats to lend me money when the time comes.

@@goldtax8447 yes

What business

Can I purchase 50.1% of your business?

what did they ask you?

Then what did they ask you?

There’s 2 things to remember here: Levered cash flows change based on the capital structure of the firm because it assumes the firm uses x% of leverage. Also, there are only 2 real costs (excluding preferred shares): the cost of equity and the cost of debt. Once the cost of debt is covered (your interest expense), all other cash flows get returned to equity. This is what makes the use of leverage so powerful. Thus, in calculating levered free cash flows, you are splitting the CFE & CFD burdens, lessing out the cash flow to debt, and ultimately being left with the cash flow to equity, which then is discounted using the cost of equity.

@@Viipxzcheers! So for lvrd cash flow we just deduct interest expenses from out fcf - Or anything else as well?

@@lp9760 the FCF and LFCF formulas are actually a little different. FCF, as you know, is EBIT(1-t) + D&A - change in NOWC - CapEx. For levered free cash flows, the formula is EBITDA - change in NOWC - CapEx - Mandatory Debt Payments. Therefore, it is very similar to FCF, but you don’t include the tax burden after lessing interest. This means it shows the free cash flows after all mandatory expenses have been made (and thus it is cash flow to equity).

Using unlevered free cash flow in a DCF uses WACC as the discount rate and spits out enterprise value. Unlevered free cash flows are earnings available to all investors in the business, shareholders and creditors so a DCF using unlevered cash flows will yield enterprise value. Levered free cash flow is just unlevered cash flow - debt service (interest expense), which represents earnings available only to equityholders because debtholders have already been paid. Accordingly, you use the cost of equity as the discount rate and get equity value rather than enterprise value as the final result.

What’s worse is when you’re in the middle of answering the question and they all of a sudden ask what 18 X 18 is.

Believe me, nobody is doing this shit.

Discounted Cash Flow and Internal Rate of Return

I think you haven’t worked in banking. Relationships and trusts are just as important, if not more important than precise calculations. I don’t think investment banking will go away ever.

Everything can be automated with AI, given enough R&D dollars are poured into it, including your tiny typing computer job, little buddy.

Well you’re clueless because in investment banking it’s a necessity to know formulas by heart since it’ll cost you time to look them up or not knowing them well will cost you extra steps.

Bro what? That’s such an arrogant and presumptuous comment lmao

@@stopyappin123true

Because it's off-hand

it’s a D measuring contest

@@Godbullet98😂😂😂

Wow. Pls I'll like to know which course that was @joshgeorge5921

That's very basic stuff that you should know before applying for your very first job

@@MrMDannycorrect. FCF should be learned in a introductory finance class and enterprise calculations in a intermediate finance/corporate finance class.

FCF is something not one single person in industry won’t know perfectly as it is a very simple concept and there are a couple of ways to calculate it, varying depending on the situation.

I’m currently a freshman, I took this financial accounting course series on EdX by Cambridge, and a ton of this stuff was actually discussed in this interview, which felt really rewarding for me because it’s the first time I’ve seen my time spent on that actually pay off. I took it because I’m in the loop with an investment research firm, and they do a lot of accounting statement research stuff. Hope I made the right decision lol

I learnt this in my BSc. in engineering management undergraduate program. The course's name was Corporate Finance.

MEMORY

It is defined as no of outstanding shares times the price of a share. Even in cases of startups, despite them burning cash and incurring losses, the share price is never negative. A neg share price would mean that the company is actually paying you money for owning their stock/company. Remeber valuation is not just about how much you have earned in the past or in the present but also about the future. Startups may be in losses at present but they have great growth potential.

You actually can have negative equity (book value), however not market capitalization value. Now, Boeing is an example of negative equity ( book value).

Literally the same thing. There’s more than one word to call it

Net income is the income after paying out interest expense, right? Here he just subtracted the tax. @@thetwoboyz4542

Elaborate

He forgot to substract D&A when calculating NI

I see makes sense

@@MrMerlin5000 no it was assumed (D&A is incl. in operating expenses) and therefore we add D&A back to Net Income (not actually net income, it's tax-effected EBIT/operating income)

Fair point, an excellent candidate would have mentioned that though

He answered the questions fine wdym? This is coming from a finance major

How’d it go

@joebertotto7220 actually not bad? If I get an offer I'll lyk 😤😤

@@ezabellakhan8488 waiting for your update, best of luck!

​@@ezabellakhan8488update?

Update?!??

Business failling rate is way too high. Markets are very concentrated at this point

Starting in finance is prob one of the best careers before becoming an entrepreneur

IB opens way more exit opportunities and is a lucrative career. Getting into IB and not being kicked out = set for life pretty much.

the question wasn’t what it measures though?

Its a correlation not necessarily volatility @@carterhughes683

It measures volatility.

His answer is right, EV=Mcap+outstanding debt+pref stock+minority interest-cash/cash eqv. 2. According to the formula you could have a negative EV but it is not real life applicable-scenario.

His answer was literally right

@@shabierstanakzai9964 No it was wrong. I know everybody calculates EV like that, but everybody is wrong. The purpose of subtracting cash is thah the cash is not a part of the main business and you want EV to be comparable to other businesses (for example). But cash is not the only thing that is unrelated to the main business that companies can hold. They can have non-operating real estate, investments in equity, bonds, overfunded pensions... you name it. All of those things should be subtracted. Proper formula should be: equity and equivalents + debt and equivalents - non-operating items. That's the only correct formula. And I know... Thats a shocker that most pristine financial institutions do it incorrectly...

@@user-hh6ye3ty3deverybody is wrong, okay little man if every single person in finance has made an error why are you the only one crying wolf about it, kiddo? When there are hundreds of millions of people smarter and more technical than you, buddy?