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Happy Tuesday, future bankers!

Hope everyone is doing well! Today we’ll be going over the basics of retained earnings, how to talk about what sets you apart from the crowd, and yesterday’s hotter-than-expected inflation report.

🚀 Let’s get into it.

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🔢 Technical Question

“What is retained earnings? How do you go about calculating it?”

Certainly! In an investment banking internship interview, understanding retained earnings is crucial. Let’s break it down:

1. What Are Retained Earnings?:

   • Retained earnings represent the cumulative profits a company has retained over time. It’s the portion of net income that the company chooses to reinvest in its operations rather than distribute as dividends to shareholders.

   • These earnings accumulate over multiple accounting periods and are reported on the balance sheet under the shareholder’s equity section.

2. Calculation of Retained Earnings:

   • The formula for calculating retained earnings is straightforward:

     • Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividends

   • Here’s what each component means:

     • Beginning Retained Earnings: The retained earnings balance from the previous accounting period.

     • Net Income: The company’s total profit after accounting for all expenses, taxes, and interest.

     • Dividends: Any cash payments made to shareholders during the period.

   • By applying this formula, you can determine the retained earnings as of the current accounting period.

Remember, understanding financial statements and concepts like retained earnings demonstrates your analytical skills and knowledge of corporate finance. Be prepared to discuss how retained earnings impact a company’s growth, capital allocation decisions, and overall financial health during your interview!

🗣 Behavioral Question

"What makes you different than the thousands of other applicants that applied?"

Remember, it’s essential to stand out without resorting to clichés. Don’t just say that you “work harder” or “have a greater passion for finance.” Instead, focus on what unique life experiences have helped shape you. Speak to these, and the interviewer will be able to recognize your authenticity. Remember, authenticity and relatability matter more than grandiose claims. Showcase your true self, and let your unique journey shine through!

Example Response: 

"While I understand the competitive landscape, I believe my distinct background and qualities set me apart:

1. Cross-Cultural Exposure:

   • Growing up in a multicultural household, I learned to appreciate diverse perspectives.

   • This exposure taught me adaptability, empathy, and the ability to bridge cultural gaps.

2. Resourcefulness During Challenges:

   • During a summer job at a small family-owned business, we faced supply chain disruptions.

   • I collaborated with the team to find creative solutions, demonstrating my problem-solving skills.

3. Community Impact:

   • As a volunteer at a local shelter, I organized weekly literacy sessions for children.

   • Seeing their enthusiasm for learning reinforced my commitment to community service.

   • I’ve been volunteering at the shelter for years, far before I ever knew about investment banking or the tactics of sprucing up your resume. Instead, I volunteer because I genuinely enjoy it.

4. Navigating Unexpected Paths:

   • While studying abroad, I unexpectedly fell in love with Japanese literature.

   • This detour led me to explore storytelling, symbolism, and cultural nuances.

5. Balancing Academics and Athletics:

   • As a varsity athlete, I learned time management, discipline, and teamwork.

   • These skills translate seamlessly into a fast-paced work environment.

In summary, my genuine passion, adaptability, community focus, and ability to find value in unexpected experiences make me a candidate who brings a fresh perspective. I’m excited to contribute these qualities to your team."

🗞 Industry News

🔥 Inflation Comes in Hot

The Federal Reserve is taking its time before hitting the rate-cut button, especially after a spicy inflation report caught everyone off guard. Investors who were previously betting on rate cuts as soon as May are now eyeing June with about an 80% chance. The Consumer Price Index (CPI) report showed prices heating up more than expected, leaving economists sweating over their forecasts. Core inflation, which strips out the volatile stuff like food and gas, was hotter than a jalapeño, doubling the Fed's 2% target.

This surprising twist means the Fed's rate-cut plans are on hold for now, as officials want to see more data and get comfy with where inflation's headed. Fed Chair Jay Powell's basically saying, "Hold your horses, folks, we need to be absolutely sure before we make any moves." Investors, who were initially expecting a quick fix, are now settling in for a slower ride, probably kicking off around summertime. Despite some political pressure, the Fed's staying cool-headed and sticking to their guns, ready to tackle whatever comes their way.

Read more about this story below.

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