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Happy Tuesday, future bankers!

Hope everyone is doing well! Today we’re covering calculating Cash from Operations, unique knowledge, and Matterport’s huge acquisition premium.

🚀 Let’s get into it.

🔢 Technical Question

How do you go from Net Income to Cash from Operations?

Let’s simplify the process of converting Net Income to Cash Flow from Operations (CFO):

1. Starting Point: Begin with the net income, which represents the profits earned during a specific period.

2. Adjust for Non-Cash Items: We add back non-cash expenses, such as depreciation and amortization (D&A). These are accounting entries that don’t involve actual cash outflows. By doing this, we get a better picture of the true cash impact.

3. Consider Changes in Working Capital: Under accrual accounting, revenue is recognized even if cash hasn’t been received yet. Similarly, expenses are recognized even if cash hasn’t been paid. We account for these changes in working capital (items like accounts receivable and accounts payable).

   • Increase in Working Capital Asset (e.g., accounts receivable): Decreases cash.

   • Decrease in Working Capital Asset (e.g., accounts receivable): Increases cash.

   • Increase in Working Capital Liability (e.g., accounts payable): Increases cash.

   • Decrease in Working Capital Liability (e.g., accounts payable): Decreases cash.

Remember that CFO helps us understand the actual cash flow generated by a company, excluding capital expenditures (CapEx) .

🗣 Behavioral Question

What is something that you know that isn’t common knowledge? Teach me about it.

Here are some best practices for responding to the question:

1. Ensure Uniqueness: The knowledge you share should be unique and not commonly known. This will demonstrate your deep understanding and passion for whatever topic you choose.

2. Explain Clearly: Break down the concept into simple terms. Start with a brief introduction, explain the concept, and then discuss try to draw a connection or application to investment banking.

3. Show Enthusiasm: Show enthusiasm while explaining the concept. This will demonstrate your passion for learning and sharing knowledge.

4. Engage the Interviewer: Try to engage the interviewer in the discussion. Ask them if they are familiar with the concept.

Remember, the goal is not just to share knowledge, but also to demonstrate your communication skills, your ability to simplify complex concepts, and your interest for investment banking.

🗞 Industry News

📈 Matterport Soars on Acquisition News

Digital twin platform Matterport, known for its technology that creates digital replicas of physical spaces, is set to be acquired by one of its customers, Costar. The cash-and-stock deal values Matterport at about $1.6 billion, a significant premium over its recent share price. This comes as a welcome development for Matterport, which has been grappling with sluggish growth and a challenging macroeconomic environment. Despite efforts to improve profitability, the company’s shares have been underperforming since its public debut via a SPAC deal in 2021.

Matterport, which started in 2011, quickly gained prominence with its 3D imaging cameras. Its services found significant traction in the real estate space, a sector that has increasingly turned to virtual tours amid the pandemic. The company has also diversified its offerings, enabling clients to create virtual tours with smartphones and integrating AI to generate 3D digital twins. Costar, a real estate heavyweight with a market cap of $34.84 billion, sees value in Matterport’s technology. It plans to incorporate Matterport’s virtual tours on its platforms, enhancing the home viewing experience for potential buyers. However, the deal is subject to regulatory approvals, a hurdle Costar has faced in the past. The future of Matterport’s activities beyond real estate, such as its partnership with Facebook, will be interesting to track post-acquisition.

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!