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What does an Investment Banker Do?

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What do what does an Investment Banker do each day? What does the day-to-day routine look like for a typical Banker? The short story is that your seniority in the hierarchy largely determines your daily routine. Showing the roles and responsibilities for Senior, Mid-Level, and Junior Investment Bankers There are three major buckets within the Investment Banking hierarchy: Senior Bankers – Managing Directors (‘MDs’) and Senior Vice Presidents (‘SVPs’) build and foster client relationships. Mid-Level Bankers – Vice Presidents (‘VPs’) lead deal execution. Junior Bankers – create supporting materials and analyses used to ‘Pitch’ clients for new business and for ‘Live Deal’ execution. As you can see above, what Investment Bankers do in each role is slightly different. In the coming sections, we’ll dig deeper into the roles and responsibilities at each level. A ‘Typical’ Investment Banking Career Path One of the most common questions at this point is, “What is the ‘typical’ Investment Bankin
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Finance Interview Questions (and Answers)

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1. Walk me through the three financial statements. Balance Sheet: This statement shows a company’s assets, liabilities, and shareholders’ equity, essentially outlining what the company owns, what it owes, and its net worth. Income Statement: This statement details the company’s revenues, expenses, and net income, providing insight into its profitability. Cash Flow Statement: This statement highlights the cash inflows and outflows from three areas: operating activities, investing activities, and financing activities, giving a comprehensive view of the company’s cash generation and usage. 2. If I could use only one statement to review the overall health of a company, which statement would I use, and why? "Cash is king." The statement of cash flows offers a true picture of the company’s cash generation, which is crucial for understanding its financial health. However, other answers can also be valid with good justification, such as: Balance Sheet: Because assets are the true dri
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General Finance Interview Tips

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When preparing for a finance interview, you will face two main categories of questions: Behavioral/Fit Questions Technical Questions Behavioral/Fit Questions Behavioral and fit questions focus on your soft skills, such as teamwork, leadership, commitment, creative thinking, and overall personality. Being well-prepared for these questions is crucial. The best strategy is to identify 5-7 specific situations from your resume that showcase your leadership, teamwork, ability to overcome weaknesses, hard work, and problem-solving skills. These examples will help you answer behavioral questions effectively. To assist with this, we have created a separate guide to behavioral interview questions. Technical Questions Technical questions are related to specific accounting and finance topics. This guide focuses exclusively on technical finance interview questions. Best Practices for Finance Interview Questions Here are some general best practices to help you tackle finance interview questions: Tak
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Understanding Financing Fees: Key Changes and Implications : Arizona State based

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Introduction to Financing Fees When a company borrows money, it incurs third-party financing fees, known as debt issuance costs. These fees are paid to bankers, lawyers, and other parties involved in arranging the financing. These costs are crucial for understanding the financial implications of borrowing and how they impact the company's balance sheet and financial statements. Pre-2015 Treatment of Financing Fees Before April 2015, financing fees were treated as a long-term asset and amortized over the loan's term using either the straight-line or interest method. These were known as deferred financing fees. ASU 2015-03: A Significant Accounting Update In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-03, which changed how debt issuance costs are accounted for. Effective December 15, 2015, the update requires that financing fees be deducted directly from the debt liability as a contra-liability, rather than creating an asset. Key Changes Introduced
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Understanding Original Issue Discount (OID)

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What is an OID? An Original Issue Discount (OID) refers to a feature of debt financing where the issuance price is less than the stated redemption price. In simpler terms, OID occurs when debt securities are sold below their redemption price, which is the par value. How to Calculate OID An OID is created when debt instruments are sold at a discounted price lower than their redemption price. The formula for calculating OID is: OID = Redemption Price − Issuance Price Redemption Price: The par value of the bonds, i.e., the amount obligated to be returned on the date of maturity. Issuance Price: The offering price that the bonds were sold for on the date of sale. Example of OID Calculation Suppose a company wants to raise $100,000 in debt. To make the financing more appealing, the company offers to accept $98,000 in capital. However, on maturity, the borrower still has to pay back the full $100,000 plus periodic interest based on the stated interest rate and the $100,000 principal. Borrowe
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Gautam Adani Responds to Hindenburg Report, Emphasizes Strength and Resilience at AGM

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Disclaimer: This blog is for informational purposes only and does not constitute financial, investment, or legal advice. The views expressed are those of the author and not necessarily those of any affiliated entities. Gautam Adani, while speaking at the Adani Group's 32nd Annual General Meeting (AGM), addressed the controversy stemming from the Hindenburg report. Adani asserted that the group not only weathered the storm caused by the allegations but also emerged stronger, proving its resilience and robustness. Hindenburg Report's Allegations The Hindenburg report accused the Adani Group of stock manipulation and improper use of tax havens. These accusations led to significant volatility and a sell-off in the conglomerate's stock prices. However, Adani firmly believes that the report was strategically designed to defame the company. "It was a two-sided attack, a vague criticism on our financial standing," said Adani, describing the report as an orchestrated attem
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What are Basis Points?

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Basis Points (bps) are a standard unit of measurement for interest rates and other percentages in finance, equating to 1/100th of 1.0%. This term is frequently used in discussions about interest rate environments, such as those involving the Federal Reserve or bond and fixed-income securities. Understanding Basis Points (bps) How to Calculate Basis Points One basis point is equal to one-hundredth of a percentage point, or numerically, 1/100th of 1.0%. In the finance industry, discussing interest rates in terms of basis points is common practice, especially for smaller figures. This practice reduces misinterpretations as basis points are absolute figures, making them easier to understand compared to small percentages. Using basis points to describe interest rates, spreads, and yields is more precise because minor changes can significantly impact the economy or financial instruments. Basis points, pronounced as “bips,” are relevant in contexts involving government bonds, corporate bonds,
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Understanding SOFR: The Secured Overnight Financing Rate

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Disclaimer: This blog is intended for informational purposes only and should not be considered financial advice. Consult with a financial advisor for advice tailored to your individual circumstances. The Secured Overnight Financing Rate (SOFR) is poised to replace the London Interbank Offered Rate (LIBOR) as the global benchmark for lending rates by mid-2023. Derived from the Treasury "repo" market, SOFR represents the borrowing costs of cash collateralized by Treasury securities. What is SOFR? SOFR stands for the "Secured Overnight Financing Rate" and reflects the costs associated with borrowing cash collateralized by Treasury securities in the repo market. The repo market involves short-term borrowing and lending transactions secured by highly liquid securities, primarily U.S. Treasury securities. Participants in the Repo Market Key participants in the repo market include: Banks and Financial Institutions (Primary Dealers) Corporations Governments (e.g., NY Fed, C
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Post Office Time Deposit Scheme: A Safe Investment with Tax Benefits and Attractive Returns

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Disclaimer: This blog provides information about the Post Office Time Deposit Scheme for educational purposes only and should not be construed as financial advice. Consult a financial advisor for personalized recommendations. Investing in the Post Office Time Deposit Scheme offers the benefit of tax exemption under Section 80C of the Income Tax Act, 1961, along with excellent interest rates. Post Office Savings Schemes: Safe and Rewarding Post Office Savings Schemes are gaining popularity due to their combination of safety and high returns. These schemes cater to a wide range of investors, from children to the elderly. Among these, the Post Office Time Deposit Scheme stands out for its strong returns and secure investment. This five-year scheme is particularly attractive because it offers both safety for your capital and substantial returns, making it a preferred choice among investors. Attractive Interest Rates Everyone aims to save a portion of their earnings and invest it where it i
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Over 90,000 IT Jobs Lost in 2024: Silent Layoffs Loom for Many More

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Over 90,000 IT Jobs Lost in 2024: Silent Layoffs Loom for Many More Disclaimer: This article aims to provide information on the current trends in the IT industry and the challenges faced by employees. The details presented are based on available data and reports, and readers should consider the dynamic nature of the job market. In the first half of 2024, the tech industry has seen a staggering 98,834 employees laid off, with silent layoffs emerging as a growing concern, particularly among Indian IT workers. This alarming trend follows a significant wave of job cuts that began in 2022, affecting major companies such as Amazon, Alphabet, Microsoft, and Meta. The pace of layoffs only intensified in 2023, with a 59 percent increase compared to the previous year, resulting in 262,915 employees losing their jobs across various firms, according to Layoff. The primary factors driving these layoffs include economic downturns, overhiring during the pandemic, and strategic restructuring aimed at
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Stubborn Food Prices Hampering Disinflation Efforts: RBI Governor Shaktikanta Das at Monetary Policy Committee

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Stubborn Food Prices Slow Retail Inflation Decline: RBI Governor Shaktikanta Das Stubborn food prices are responsible for the slow pace of decline in overall retail inflation, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. Speaking at the Monetary Policy Committee (MPC) meeting earlier this month, Das highlighted this issue while voting to maintain the policy rates, as revealed in the MPC minutes released on Friday. The MPC voted 4:2 in favor of retaining the benchmark interest rate (repo rate) at 6.50 percent for the eighth consecutive time. "Headline CPI inflation is moderating, but at a very slow pace, and the last mile of disinflation is turning out to be gradual and protracted," Das said in the meeting, as per the minutes. He attributed this sluggish progress primarily to food inflation, stating, "Food inflation is the main factor behind the grudgingly slow pace of disinflation. Recurring and overlapping supply-side shocks continue to play an out
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Balanced Life-Cycle Fund for NPS Subscribers in the Works: PFRDA Chief Deepak Mohanty

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PFRDA to Launch Balanced Life-Cycle Fund for NPS Subscribers India's pension fund regulator, the Pension Fund Regulatory and Development Authority (PFRDA), is set to introduce a balanced life-cycle fund aimed at subscribers who prefer a higher equity allocation in their portfolios. This initiative, expected to launch in the September quarter, was announced by PFRDA Chairperson Deepak Mohanty on Friday. “The fund will be an additional option in the auto choice, allowing a maximum equity allocation of up to 50%, with tapering starting only after 45 years of age,” Mohanty explained during the PFRDA's Annual Felicitation Program for Atal Pension Yojana (APY) in New Delhi. “This will help subscribers accumulate a larger corpus in their individual retirement funds.” Understanding Life-Cycle Funds Life-cycle funds are asset-allocation funds that automatically adjust the share of each asset class to lower risk as the retirement date approaches. Current NPS Options The National Pension
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Zepto's IPO on the Horizon: Company Secures $665 Million in Largest Funding Round of the Year

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Zepto Prepares for IPO After Doubling Valuation to $3.6 Billion Grocery delivery startup Zepto is gearing up to go public after more than doubling its valuation to $3.6 billion in a recent round of financing led by both US and local investors. The company raised $665 million from new investors, including private equity firm Avenir, venture firm Lightspeed, and Avra, a new fund started by former Y Combinator Continuity head Anu Hariharan. Existing investors such as Glade Brook, Nexus, and StepStone Group co-led the round, according to a statement by the startup. Zepto's valuation surge comes as the company is on track to handle more than $1 billion worth of goods annually, based on its performance in May. Approximately three-quarters of its warehouses were making an operating profit in May, and the company noted that its stores now take about six months to become profitable, compared to around two years previously. The company plans to double its number of warehouses to over 700 by
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Fixed Interest Rate: An Overview

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A fixed interest rate remains constant for the entire duration of the loan agreement. Unlike floating interest rates, which are tied to a prime rate or underlying index and can fluctuate, fixed interest rates offer stability and predictability. How to Calculate Fixed Interest Rates When a loan or bond is priced at a fixed interest rate, the interest expense amount due each period is set and does not change over time. Fixed pricing is more common with bonds and riskier debt instruments lower in the capital structure, rather than senior debt provided by banks. The primary benefit of a fixed interest rate is the predictability it offers. Borrowers do not need to worry about changing market conditions that could impact the amount of interest due. This stability mitigates the risk of substantial increases in interest expenses. Borrowers are more likely to choose fixed rates in low interest rate environments to "lock-in" favorable borrowing terms for the long term. Fixed Interest R
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Floating Interest Rate: An Overview

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A floating interest rate, also known as a variable rate, refers to a loan pricing mechanism where the interest rate fluctuates over the borrowing term. This fluctuation occurs because the interest rate is tied to an underlying index. Understanding Floating Interest Rates A floating interest rate is contingent on an underlying benchmark and is expressed as a percentage of the outstanding loan amount. Unlike fixed interest rates, which remain constant throughout the borrowing period, floating interest rates change based on prevailing economic conditions. Calculating Floating Interest Rates The interest rate pricing of debt with floating interest rates is typically expressed in two parts: Base Rate (e.g., LIBOR) Spread Floating Interest Rate Formula Floating Interest Rate (%) = Base Rate + Spread This formula calculates the interest expense on securities priced on a variable basis. Generally, floating interest rates are associated with senior debt, whereas fixed interest rates are more co
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F&O Transactions Could Face Increased Tax Rates

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F&O Transactions Could Face Increased Tax Rates The government is exploring measures to curb retail participation in the futures and options (F&O) market. Proposed changes include reclassifying F&O from ‘business income’ to ‘speculative income’ and/or implementing a tax-deductible-at-source (TDS) in the upcoming Budget, according to informed sources. A source noted, “The government and regulators have been concerned about the surge in retail investor activity in the derivatives market. There are fears that market corrections could lead to significant retail investor losses, negatively impacting overall market sentiment.” Reclassifying F&O income as ‘speculative income’ would equate it with lottery or cryptocurrency investments. Currently, F&O income is taxed as business income, which is combined with business/salary income and taxed at applicable slabs of 5%, 20%, and 30%. An advantage of the current classification is that gains can be offset against other losses. “
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Understanding Different Types of Financial Models

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What are Financial Models? Financial models are essential tools in corporate finance used to project a company’s future financial performance. These models help in making informed business decisions and are tailored to specific situations. Here, we’ll explore the most common types of financial models used in the industry. Common Types of Financial Models 1. 3-Statement Financial Model The 3-statement financial model is the backbone of most financial modeling. It includes: Income Statement: Shows profitability through revenue, expenses, and net income. Cash Flow Statement: Adjusts net income for non-cash charges and changes in net working capital, detailing cash flows from operations, investing, and financing. Balance Sheet: Displays assets, liabilities, and shareholders’ equity. This model uses historical financial data to project future performance, requiring assumptions about growth rates and margins. 2. Discounted Cash Flow (DCF) Model The DCF model estimates a company’s intrinsic v
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NVIDIA Overtakes Microsoft and Apple to Become the World's Most Valuable Company

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NVIDIA Surpasses Microsoft and Apple to Become the World's Most Valuable Company NVIDIA has achieved a remarkable growth of 3.92%, with its stock currently hovering around $136. This achievement comes shortly after NVIDIA overtook Apple, the previous second-place holder, solidifying its position as the top company in the world in terms of market valuation. The chipset maker has now overtaken Microsoft, reaching a valuation of $3.348 trillion at the time of writing this article. This leap of two places has pushed down both Microsoft and Apple in the rankings. NVIDIA's advanced chipsets are playing a crucial role in the race for artificial intelligence (AI) market dominance. As the demand for AI technologies continues to grow, NVIDIA's innovations and strategic positioning have significantly contributed to its rise in market valuation. Disclaimer: The market valuations and stock prices mentioned in this article are based on current data and are subject to change. Investors sh
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What is Direct Listing?

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Direct listing is a process by which a company goes public by listing its existing shares directly on an exchange and offering them to the open market. Unlike traditional initial public offerings (IPOs), a direct listing does not involve issuing new shares or pre-selling shares to institutional investors. How Does a Direct Listing Work? Direct listings represent a shift from the traditional IPO model, where a company starts trading on an exchange without pre-negotiated shares sold to institutional investors at a designated price. Instead, the company’s shares begin trading directly in the open market. Companies opting for direct listings are typically well-funded and do not need to raise additional capital through an IPO. This method allows for existing shares to be sold to public investors without creating new shares, thus avoiding dilution of existing shareholders' equity. Recent Examples of Direct Listings Several high-profile technology startups have chosen direct listings over
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What is a Secondary Offering?

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A Secondary Offering involves the sale of shares that have already been issued to the public. This can occur in the secondary market among investors or through the issuance of additional shares by a company that has already gone public, often referred to as a seasoned equity offering or “follow-on” offering. How Does a Secondary Offering Work? Primary Market vs. Secondary Market Primary Market: This is where securities are initially sold to investors during an IPO. The proceeds from these sales go directly to the issuing company. Secondary Market: In this market, securities are traded among investors. The proceeds from these transactions go to the sellers, not the issuing company. Types of Secondary Offerings Non-Dilutive Secondary Offering: Involves trading shares that were previously issued in an IPO. Does not dilute the existing ownership structure, as no new shares are created. Example: Shares sold by early investors or company insiders. Dilutive Secondary Offering (Seasoned Equity
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What is an IPO?

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An Initial Public Offering (IPO) is the process by which a privately held company issues shares to the public for the first time, transitioning from a private to a publicly traded company. Overview of Initial Public Offerings (IPO) Key Points An IPO allows a private company to raise capital by offering equity to public investors. Investment banks are hired to manage and facilitate the IPO process. Post-IPO, the company is recognized as publicly traded, with shares available on stock exchanges. An IPO provides significant capital and liquidity opportunities for existing investors. How Does an IPO Work? An IPO involves a private company issuing shares to the public, usually in the form of common stock, which represents ownership in the company. This is a significant milestone for companies, especially those backed by venture capital, aiming to become publicly traded. Steps in the IPO Process Hire Underwriters: The process begins with the company hiring investment banks, known as underwri
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