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Happy Sunday, future bankers!

Enjoy your last day of the weekend. Hope it was a good one.

🚀 Let’s get into it.

🔢 Technical Question

“What’s the difference between LIFO and FIFO? Can you walk me through an example of how they differ?”

In an investment banking internship interview, demonstrating your understanding of accounting fundamentals like LIFO and FIFO is key. Here's how you can answer the question effectively:

1. Explain the core difference:

• Start by clearly defining each method:

  • LIFO (Last-In, First-Out): Assumes the most recently acquired inventory items are sold first.

  • FIFO (First-In, First-Out): Assumes the oldest inventory items are sold first.

2. Illustrate with an example:

• Use a simple scenario, like buying and selling widgets at different prices:

  • Imagine you buy 10 widgets for $10 each, then 5 more for $15 each. Your total inventory cost is $150 ($10x10 + $15x5).

  • With LIFO, if you sell 8 widgets, you'd assume you sold the $15 ones first, resulting in a cost of goods sold (COGS) of $120 ($15x8). This leaves you with cheaper inventory ($10 widgets) remaining.

  • With FIFO, you'd assume you sold the $10 ones first, leading to a COGS of $80 ($10x8). This leaves you with the more expensive inventory ($15 widgets).

3. Highlight the impact:

• Explain how each method affects financial statements:

  • LIFO can lower COGS and income tax expense in periods of rising prices, leading to higher reported profits. However, it may overstate the value of remaining inventory.

  • FIFO can raise COGS and income tax expense in such periods, resulting in lower reported profits. But it might provide a more accurate representation of inventory value.

4. Show analytical and critical thinking:

• Briefly mention that the choice between LIFO and FIFO depends on various factors like:

  • Company's inventory turnover rate

  • Inflationary environment

  • Tax implications

  • Desired impact on financial statements

🗣 Behavioral Question

"Describe an occasion when you failed at a task."

In an investment banking interview, it's crucial to turn "failures" into valuable learning experiences. Here's how you, as a college student, can answer the "Describe a time you failed at a task" prompt:

1. Choose a relevant experience:

Don't dwell on personal failures outside the professional sphere. Select an incident related to academics, extracurriculars, or internship projects that demonstrates transferable skills and growth.

2. Focus on the "process" more than the outcome:

Instead of solely highlighting the failure, emphasize the steps you took, decisions you made, and challenges you faced along the way. This showcases your problem-solving approach and ability to learn from mistakes.

3. Demonstrate initiative and resilience:

Don't dwell on what went wrong. Explain how you reacted to the failure, including proactive steps you took to rectify the situation, improve your skills, or adapt your approach.

4. Quantify the impact (if possible):

If your effort to overcome the failure led to positive outcomes, quantify the results. Did you improve your team's performance? Increase efficiency? This adds weight to your story.

5. Example response:

"During my first finance internship at a venture capital firm, I was tasked with analyzing a company's market potential for a potential investment. Initially, I relied solely on historical data and financial reporting, overconfident in my analytical skills. Unfortunately, my pitch to the senior analyst fell flat, as the market had shifted significantly due to unforeseen events.

This was a humbling experience. I realized the importance of considering external factors and incorporating real-time data alongside historical trends. To improve, I started attending market research webinars, proactively sought feedback from senior analysts, and honed my research skills by focusing on current news and industry trends. By the next project, I presented a comprehensive analysis using both historical and current data, successfully identifying a profitable investment opportunity. This experience taught me the value of humility, continuous learning, and adapting to ever-changing market dynamics, skills I believe are essential for success in investment banking."

Remember:

• Be honest and authentic, but frame the experience as a positive learning opportunity.

• Highlight your proactiveness, resilience, and ability to adapt and grow.

• Keep the response concise and focused on transferable skills relevant to the interview context.

By showcasing your ability to learn from failure and apply those lessons to improve, you can turn a negative experience into a positive indicator of your potential in the eyes of the interviewer.

🗞 Industry News

Max 9 Jets Take Flight Again 🛬

Following their grounding after a panel blew out mid-flight, Alaska Airlines and United Airlines have resumed operations with their Boeing 737 Max 9 jets. Both airlines received the necessary approvals and completed thorough inspections to ensure the planes' airworthiness. Alaska began the first flight on Friday, with a full schedule expected by next week, while United carried its first passengers on Saturday.

The grounding stemmed from an incident on an Alaska Airlines flight in January, where one of the door plugs sealing unused exit holes burst open at high altitude. Thankfully, no passengers were seriously injured. The FAA subsequently grounded all Max 9s in the US, prompting CEO Stan Deal to express deep regret for the disruption and pledge to regain public trust through improved quality control.

The FAA has now outlined the detailed inspection process for the door plugs, ensuring rigorous checks before any additional planes return to service. This incident serves as a stark reminder of the importance of aviation safety and Boeing's ongoing efforts to rebuild trust after previous issues with the Max series.