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Happy Monday, future bankers!

Hope everyone is doing well and has had a great start to their week! Today we’re covering how the financial statements link, an achievement that you’re proud of, and a company that was accused of making up $78 billion of revenue.

🚀 Let’s get into it.

🔢 Technical Question

How do the three financial statements link together?

The three key financial statements – the income statement, balance sheet, and cash flow statement – are interconnected and express different aspects of a company’s financial health. Here’s a step-by-step guide on how they link together:

1. Income Statement to Balance Sheet: The net income from the income statement is added to the retained earnings in the equity section of the balance sheet. This increases the company’s total equity.

2. Balance Sheet to Cash Flow Statement: The change in the cash balance between two consecutive balance sheets is reported in the cash flow statement. This statement is divided into three sections: operating activities, investing activities, and financing activities.

3. Cash Flow Statement to Income Statement: The cash flow from operating activities section begins with the net income from the income statement. Then, non-cash expenses like depreciation and changes in working capital (current assets and current liabilities) are adjusted to calculate the net cash provided by operating activities.

4. Cash Flow Statement to Balance Sheet: The net increase or decrease in cash from the cash flow statement is added to or subtracted from the cash in the previous period’s balance sheet to arrive at the cash for the current period’s balance sheet.

5. Completing the Cycle: The updated balance sheet reflects the company’s financial position at the end of the period, including the retained earnings updated from the income statement and the cash updated from the cash flow statement. This completes the cycle and sets the stage for the next period’s financial statements.

Remember, these statements offer different perspectives but are all necessary for a comprehensive understanding of a company’s financial situation. They should be read and analyzed together for a complete financial analysis.

🗣 Behavioral Question

What’s an achievement that you’re proud of? Why?

Consider the following best practices:

1. Choose a Significant Achievement: Select an achievement that had a significant impact on you or others. It doesn’t necessarily have to be related to finance or banking. It could be a personal accomplishment, an extracurricular success, or an academic achievement.

2. Be Specific: Provide specific details about your achievement. What was the project or task? What was your role? What obstacles did you overcome? What was the outcome?

3. Highlight Transferable Skills: Even if your achievement isn’t directly related to finance, highlight the transferable skills you gained from it. These could include leadership, problem-solving, teamwork, perseverance, etc.

4. Connect to the Role: Explain how your achievement and the skills you gained from it can benefit you in the role you’re applying for. This helps the interviewer see your potential value as an intern.

5. Show Enthusiasm: Convey your passion and enthusiasm when talking about your achievement. This can help make your response more engaging and memorable.

🗞 Industry News

😳 Company Accused of Over-Inflating Revenue by $78B

China Evergrande Group, a key player in China’s real estate crisis, reportedly inflated its revenue by over $78 billion in the two years before its downfall, as per China’s top securities regulator. The company’s main onshore unit, Hengda Real Estate Group, boosted its 2019 income by about $29.7 billion by recognizing sales in advance, and another substantial amount in the 2020 annual results. The China Securities Regulatory Commission (CSRC) attributed much of the blame to Hui Ka Yan, the founder and former chairman, who allegedly instructed personnel to inflate Hengda’s annual results for those years.

The allegations are the latest setback for Hui, once one of Asia’s wealthiest tycoons, who oversaw an empire spanning real estate to electric vehicles. His empire began to crumble after regulators imposed strict borrowing restrictions, and an economic slowdown and the pandemic impacted sales. Hui, once worth $42 billion, has seen his wealth drop to about $1 billion after the company defaulted in 2021. The group received a liquidation order from a Hong Kong court in January, marking the largest collapse in the three-year real estate crisis. Meanwhile, another Hong Kong mansion linked to Hui has been put up for sale.

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!