⏱ Reading Time: 3 Minutes 48 Seconds

Happy Tuesday, future bankers!

Hope everyone is doing well! Today we’re going over which financial statement to use to value a company, what went into your decision of where to go to college, and a $35 billion M&A deal. 

🚀 Let’s get into it.

🔢 Technical Question

“If you could only use one of the three financial statements to value a company, which would should you choose? Why?”

The correct answer here is to choose the Cash Flow Statement. While all three financial statements provide valuable information, the Cash Flow Statement provides a clear picture of the actual cash generated by a company’s operations, which is a key indicator of its financial health and valuation.

The Income Statement can sometimes be misleading due to accounting rules like revenue recognition and expense matching, which may not reflect the actual cash inflows and outflows. The Balance Sheet provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time, but it doesn’t show how cash moves in and out of the business.

On the other hand, the Cash Flow Statement shows how changes in the Balance Sheet and Income Statement affect cash and cash equivalents. It allows investors to understand how a company runs its operations, where its cash is coming from, and how it is being spent.

However, it’s important to note that relying on a single financial statement without considering the others can lead to an incomplete understanding of a company’s financial health. In practice, analysts should use all three to get a comprehensive view of the company’s performance."

Remember, this is a common question in finance interviews and it’s often used to test your understanding of financial statements and their importance in company valuation.

🗣 Behavioral Question

"I’m sure you had many places that you could have gone to college. Why did you choose to attend [University Name] in particular?"

Consider following these best practices:

• Keep it positive. When answering this question in an interview, explain how you came to your decision in a way that reflects positively on you. You want to show that you’re responsible, logical and committed to your goals.

• Share your priorities. Explain what factors were most important to you when choosing a college, such as the academic reputation, the faculty, the curriculum, the campus culture, the opportunities for personal and professional growth, the location, etc.

• Relate your school to your job. Show how your choice of school connects with your choice of career. If your major doesn’t directly relate to the position, talk about relevant skills you’ve learned through electives or experience you’ve gained through internships.

Here is a brief example response for a hypothetical student:

“I originally chose to attend [University Name] because of its academic reputation as well as knowing several others from my high school whom I respected attending here ahead of me. [University Name] has lived up to its academic reputation and more. I have found opportunities for personal growth and development not only academically, but also to expand beyond classroom knowledge. Most of my professors in my major have real world experience outside of academia and it shows. The professor for the capstone class in my major was instrumental in guiding me to an internship this past summer which greatly expanded my professional experience. I believe that these experiences have prepared me well for a career in investment banking and I’m eager to learn from the best at [Company Name].”

🗞 Industry News

A $35 Billion Credit Card 💰

Capital One has made a bold move by announcing its acquisition of Discover for a whopping $35 billion, shaking up the credit card industry in a big way. This deal brings together two major players and could potentially stir things up among the big shots like Visa and Mastercard. Discover shareholders are in for a treat as they'll receive Capital One shares, valued at a nice premium compared to Discover's recent stock performance.

The merger joins forces between two giants in the credit card world, both known for catering to folks who love cashback rewards and modest travel perks. It's like putting two peas in a pod, aiming to give the big players a run for their money, or should I say, rewards. Additionally, Discover's payment network is getting a significant boost, which might just help it reclaim some lost ground in the competitive landscape.

Capital One seems to be betting on the enduring love affair Americans have with their credit cards, especially as household debt and interest rates continue to climb. But, of course, no big move comes without its fair share of regulatory scrutiny and concerns about how it might impact consumers. Despite the serious business at hand, Capital One is looking to harness the strengths of both companies to create a powerhouse payments network that can stand toe-to-toe with the industry heavyweights.

Read more about this story below.

Refer 3 Friends ➡️ Get Access to Database of 60+ IB Career Pages

1. Refer Friends: If you manage to get three of your friends to sign up for Finterview, we have a special offer for you. We’ll send you a curated database of links to the career pages of 60+ (and growing) investment banks. This way, you can streamline your search for new internships.

2. How It Works: All you need to do is reply to this email and list the email addresses of the friends you referred. Once we receive your reply and verify the sign-ups, we’ll email you the comprehensive list.

3. Questions or Clarifications: If you have any questions or need further assistance, feel free to reply to this email. We’re here to help! 🌟

Thanks for tuning in today! Best of luck to everyone working through recruiting right now. If you sign an offer, reply to this email and let us know about it! Like seriously, do it—we’d love to hear about it!