Financial Statements
Valuation
Markets
Research
Careers
100
What are the three most important financial statements?
Income statement, Balance sheet, Cash flow statement
100
Why do we value companies?
Companies have an intrinsic value that may deviate from their current market price, this creates an opportunity for investors to profit. M&A activity, Bankruptcy, etc.
100
What is a stock?
ownership (share) in a company, entitlement to a portion of a company's earnings
100
Why do we research companies?
To determine what their true or intrinsic value is To learn To understand why a company does what they do
100
Name 3 types of careers in finance?
corp finance investment banking Research S&T Wealth management There is a ton but ya^
200
What are two examples of Operating expenses?
- R&D - DD&A - SG&A - Rent expense - Other
200
How do you calculate Earnings per share? (EPS)
net income / shares outstanding = EPS
200
Who is the new Federal Reserve chairman?
Jerome Powell
200
What is a 10-k?
annual filing submitted by a publicly traded company that is audited by the SEC. Contains financial statements, company description, management overview and assessment of the year, risks, pretty much everything about the company (READ)
200
Which career handles mergers and acquisitions?
Investment Bankers
300
If you could only use one financial statement to value a company, what would you use and why?
Cash flow statement, shows true financial health of a company as well as how they're financing themselves: Debt/Equity. Income statement includes non-cash charges
300
What is a PE ratio and how do you calculate it?
Ratio that compares a company's EPS to its current trading price. Can reflect how "expensive" a company is trading in comparison to its peers. Share price / EPS = PE Ratio
300
What is the current PE ratio for the S&P 500 vs. what it historically trades at?
currently: 25-26x historically: 15-16x Gee that's RICH AF!
300
Where can I go to find industry news/reports?
IBISWorld, google your company's comps/industry or any other website, Umass library has some good resources
300
What is the difference between buy-side and sell-side?
Buy sides makes investment decisions and manages actual money. Sell-side issues research reports and tries to attract business by developing relationships with buy-side firms Sell-side: J.P. Morgan, Barclays, BAML, Goldman Sachs, Morgan Stanley Buy-side: Fidelity, Wellington, Hedge Funds, Pension Funds, other Asset Managers
400
What is gross margin? How do we calculate it?
Gross profit = revenue - COGS Gross profit/Revenue = Gross margin.
400
What is EV/EBITDA? How is it calculated and why do we use it?
EV = market cap + debt - cash/Earnings before interest, taxes, depreciation and amortization. Use it to value company based on their "actual" earnings. Used as a multiple when acquiring companies.
400
What are the 2 most notable indexes in the US Equity market?
DJIA S&P 500
400
Is this a catalyst for CMG? You foresee avocado prices decreasing over the next few years?
Yes, because avocado prices dictate much of CMG expenses and affect their bottom-line. Decrease in avocado prices should positively impact their bottom-line
400
How many hours will I work per week in: 1. Investment banking 2. Research 3. S&T 4. Corp Fin
1. Investment banking (80-110 hours, but depends on where you work) 2. Research (60-90) 3. S&T (60-90) 4. Corp Fin (40-50 with ample lunch/water/bathroom breaks. JK corp fin is a good profession and you will have to work hard)
500
What are three connections between the 3 financial statements?
- Net income -> top line of CF statement and Retained Earnings on BS - Current Assets and Liabilities used to calculate changes in working capital on the statement of cash flows - non-cash charges in IS added back to CF from operations - Ending cash balance in CF statement -> cash on the BS - DD&A on IS calculated from PP&E on BS - Interest expense on IS is calculated from LTD on BS
500
What are 3 ways to value a company?
Simple: Market Cap, Enterprise Value More complex: DCF, Precedent transactions, Net Present Value, LBO, Comparable Analysis, Sum of the Parts
500
What has supported this current bull market and what are the potential risks?
Bull market: Strong corporate earnings, tepid economic growth, accommodative monetary policy by FED and low interest rate environment, strong global growth, expectations of potential tax cuts and better corporate earnings, heavy inflows from passive investing entities (debatable). Other? Risks: tax cuts don't get passed, investors start to fear a bear market and sell heavily, FED raises rates too quickly, corporate earnings fail to live up to the street's expectations, geopolitical bullshit,
500
Where would you find analysts questions for management?
Earnings call boisssss
500
How does S&T, banking, research, and corporate finance tie together?
Many different ways: Explain these scenarios: company wants to raise capital, go public, buy another company or sell itself to another company
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