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Happy Saturday, future bankers!

Congrats on making it to the weekend. ‘Nuff said.

🚀 Let’s get into it.

🔢 Technical Question

“How would you go about creating an expense model for a company?”

When going about answering this question, you should focus on a few things:

• Adaptability: You acknowledge different approaches and choose the most suitable one.

• Key considerations: You emphasize analyzing cost drivers, using quantitative techniques, and factoring in future scenarios.

• Communication: You mention the importance of clarity and tailoring the model for stakeholders.

Remember, adapt this response to the specific scenario of the interview question and showcase your confidence and critical thinking skills.

Example Response:

“The ideal approach for building an expense model depends on the company's size, data availability, and specific needs. In some cases, a top-down analysis of historical financials might be sufficient, leveraging existing trends and ratios. For a deeper understanding, a bottoms-up approach could be employed, starting with individual departments and key cost drivers like salaries, production costs, and overhead expenses. I'd leverage regression analysis to tie these costs to relevant variables like revenue or production volume. Regardless of the method, it's crucial to consider future scenarios and sensitivities, factoring in potential changes in market conditions, growth rates, or strategic decisions. Ultimately, the expense model should be clear, flexible, and tailored to provide valuable insights for stakeholders.”

🗣 Behavioral Question

"Why this firm?"

A question like this is an opportunity to demonstrate your genuine interest and research. Here's how you can approach it and craft a compelling answer:

1. Go beyond the generic:

• Avoid generic reasons like "prestige" or "strong deal volume." Show you've researched the firm's history, culture, and specific strengths within the industry.

2. Align with your aspirations:

• Connect the firm's values and work environment to your career goals. Mention specific practice areas or teams that excite you and how they align with your long-term aspirations.

3. Highlight specific reasons:

• Mention factors that set the firm apart from its competitors. This could be their focus on certain sectors, innovative deal structures they execute, or a unique mentorship program you found appealing.

4. Showcase your knowledge:

• Briefly reference specific deals or transactions the firm has recently worked on that you admire. This demonstrates your familiarity with their recent activity and engagement with the industry.

5. Personalize and quantify:

• Weave in a personal anecdote or experience that solidified your interest in the firm. Quantify your impact if relevant, mentioning relevant projects or achievements that demonstrate your potential fit.

Example Response:

"I'm targeting [firm name] because of its unique approach to [specific industry/sector] and its commitment to [value/characteristic]. I was particularly impressed by [specific deal/transaction], which demonstrated their ability to [positive outcome]. This aligns perfectly with my passion for [industry/sector] and my desire to work on [type of deals] that create [impact]. Moreover, I've heard from current employees that the firm's culture of [value/characteristic] fosters [positive environment], which resonates with my own [personal trait]. I believe my [skills/experience] and [personal value] would make me a great fit for this collaborative and driven team."

🗞 Industry News

The Fed just might pull off a soft landing 🛬

Inflation seems to be cooling off for the Fed, as their preferred gauge dipped below the 2% target for the first time in over two years. This has investors excited about potential rate cuts as early as March, but don't celebrate just yet. The Fed remains cautious, stressing they need more data before loosening their grip. In fact, some officials foresee waiting until the second half of 2024.

Adding another wrinkle, the unexpectedly strong economic growth in the fourth quarter could tempt the Fed to delay cuts further, just in case inflation bounces back. Ultimately, while inflation is headed in the right direction, the timing of rate cuts remains a guessing game. The Fed will closely monitor economic data before making a move, keeping both bulls and bears on their toes.