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Happy Tuesday, future bankers!

Hope everyone is doing well! Today we’re covering when to expense or capitalize an asset, a time you went out of your way to help someone, and why the AI boom might not be a bubble.

🚀 Let’s get into it.

🔢 Technical Question

How would you decide if a purchase is to be expensed or capitalized?

The decision to expense or capitalize a purchase is similar but has some additional considerations:

1. Expensed: If the purchase is for an item or service that is used up within a single reporting period (typically a year), it should be expensed. This includes items like office supplies, utilities, or even certain fees and commissions related to transactions.

2. Capitalized: If the purchase is for an asset that will provide value for multiple reporting periods, it should be capitalized. This includes items like buildings, or long-term investments in companies. These items are recorded as assets and their cost is spread out over their useful life through depreciation or amortization.

In investment banking, a key consideration is also how the purchase will affect the financial metrics that investors look at, such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Capitalizing an expense can increase EBITDA in the short term, while expensing can decrease it. However, the decision must still follow the appropriate accounting standards and guidelines.

🗣 Behavioral Question

Tell me about a time that you went out of your way to help another person.

It’s important to keep in mind that the interviewer is looking for evidence of your teamwork, empathy, and problem-solving skills. Here’s a step-by-step guide on how to structure your response:

1. Situation: Start by setting the context. Describe the situation in which you found someone needing help. Make sure it’s an authentic scenario where you were really able to lend a hand to someone.

2. Task: Explain your role in the situation. Were you a team leader, a team member, or did you notice a peer struggling?

3. Action: This is the most crucial part of your response. Detail the actions you took to help the person. How did you go out of your way to help them?

4. Result: Conclude with the outcome of your actions. Highlight the positive impact of your help, such as the successful completion of a project, improved team dynamics, a grateful co-worker, etc.

Remember to be specific and concise in your response, and focus on a situation that resulted in a positive outcome due to your initiative.

🗞 Industry News

🫧 Why the AI Boom Might Not Be a Bubble

The current boom in artificial intelligence stocks has drawn comparisons to the dot-com bubble of 1999 and 2000, causing some investors to feel a bit jittery. However, the investing landscape has changed significantly since the days of the dot-com bubble. Back then, people were snapping up individual stocks like Pets.com and Webvan, driven by the fear of missing out on the internet wave. These stocks were often overpriced and eventually left shareholders with nothing. Today, the investment approach is different, with broad-based index funds being more prevalent.

The S&P 500 is often talked about as being in a bubble due to the concentration of a handful of stocks powering the index. However, even though some tech companies saw their stocks more than double last year, driving the S&P to new highs, the market doesn’t seem to be in a bubble. This is because the other S&P companies, the Non-Magnificent 493, had a total return of 9.9%, which is about the average return the US market has shown over the long term. So, while the market may not be cheap, and could possibly decline over the mid- to long-term, it’s not quite the same as the insanely priced market of the dot-com bubble days.

Read more about this story below.

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!