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Happy Wednesday, future bankers!

Hope everyone is doing well! Today we cover the difference between levered and unlevered cash flows, how to talk about what makes you unique, and what caused Beyond Meat’s surge in their stock price.

🚀 Let’s get into it.

🔢 Technical Question

“What is the difference between levered and unlevered free cash flow? Why does it matter?”

Unlevered Free Cash Flow (UFCF) is a company’s cash flow before taking interest payments into account. It represents the cash available to all investors, both debt and equity, before the cost of borrowing is considered. It’s calculated as follows:

UFCF = EBIT * (1 - Tax Rate) + Depreciation & Amortization - Increase in Net Working Capital - Capital Expenditures

On the other hand, Levered Free Cash Flow (LFCF) is the amount of cash a business has after it has met its financial obligations, including interest payments and mandatory debt repayments. It’s the cash flow that’s available to equity investors after all expenses and debts have been paid. It’s calculated as follows:

LFCF = Net Income + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditures + Net Borrowing

The difference between the two comes down to the company’s capital structure. UFCF is independent of capital structure, making it useful for comparing companies with different debt levels. LFCF, however, is affected by the amount of debt a company has, as it takes into account the payments a company must make to service its debt.

These metrics matter because they provide insight into a company’s financial health and its ability to generate cash. They’re also used in financial modeling to estimate a company’s valuation. UFCF is often used in enterprise value multiples and in Discounted Cash Flow (DCF) models, while LFCF is used in equity valuation. Understanding these concepts is crucial in investment banking, as they play a key role in financial analysis and decision-making.

🗣 Behavioral Question

"What’s one thing that very few people know about you?"

Here are some best practices for responding to this question:

• Choose something that is relevant, interesting, and unique. You want to stand out from the crowd and show that you have something valuable to offer. Avoid generic or cliché answers, such as “I love to travel” or “I’m a hard worker”.

• Explain why you chose that thing and how it relates to your skills, goals, or values. You want to demonstrate that you have a clear sense of who you are and what you want to achieve. For example, if you say that you are a chess champion, you can explain how chess has taught you strategic thinking, problem-solving, and resilience.

• Be honest and authentic. Don’t make up or exaggerate something that is not true or that you are not passionate about. The interviewer will likely ask follow-up questions or probe deeper into your answer, so you need to be prepared to back it up with evidence or examples.

• Keep it positive and professional. Don’t share anything that is too personal, controversial, or inappropriate. You want to avoid topics that could offend or alienate the interviewer, such as politics, religion, or sexual orientation. You also want to avoid anything that could raise doubts about your suitability for the role, such as hobbies that are risky or illegal.

🗞 Industry News

Beyond Meat Stock Surges Over 50% 🍔

Beyond Meat, the plant-based meat company, saw a remarkable surge in its stock price on Wednesday, rocketing 60% to a six-month high. This jump came after Beyond Meat announced plans to raise prices and slash costs – a bold move to reverse its declining profit margins. This change in strategy also triggered a short squeeze, adding fuel to the fire.

Beyond Meat's popularity has suffered in recent years, especially as inflation strained consumer budgets. The company's stock has taken a beating since its 2019 IPO. However, their latest results beat expectations, and the new plan to cut costs while raising prices has sparked optimism. While it's still early to declare victory, this could be a positive sign for the plant-based meat pioneer.

Read more about this story below.

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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!