⏱ Reading Time: 2 Minutes 19 Seconds

Happy Wednesday, future bankers!

🚀 Let’s get into it.

🔢 Technical Question

“A company has had positive EBITDA for the past decade, but it recently went bankrupt. How could this happen?”

There are multiple explanations that could explain a situation such as this:

• Hidden cash flow issues: "Positive EBITDA doesn't guarantee positive cash flow. High depreciation expenses, large working capital requirements, or significant investments without immediate returns could have drained cash reserves."

• Unsustainable debt burden: "Even with positive EBITDA, excessive debt with high interest payments can consume cash flow, making it difficult to service the debt and survive unexpected challenges."

• One-time events: "Unforeseen events like lawsuits, natural disasters, or market downturns could have caused significant losses despite positive operational performance."

• Accounting irregularities: "In rare cases, accounting issues might misrepresent the company's true financial health, leading to misleading positive EBITDA figures."

🗣 Behavioral Question

"What initially drew you to the field of investment banking, and what motivates you to pursue a career in this industry?"

When answering this question, aim to:

1. Show genuine interest in the industry: Highlight specific aspects of investment banking that excite you, beyond just high salaries or prestige.

2. Demonstrate relevant skills and knowledge: Briefly mention skills or experiences that align with the demands of the field.

3. Express long-term aspirations: Connect your interest to your career goals and how this opportunity fits into your vision.

Here's an example response:

"What initially drew me to investment banking was the dynamic and intellectually stimulating environment. I'm fascinated by the complex financial world and the strategic decision-making involved in mergers, acquisitions, and capital raising. While the financial aspects are attractive, I'm most motivated by the potential to contribute to impactful transactions that shape companies and industries.

Throughout my [relevant experience, like academic studies, projects, or internships], I've developed strong analytical and problem-solving skills, and I thrive in fast-paced environments. I'm also a team player with excellent communication skills, crucial for collaborating with diverse stakeholders in deals.

My long-term goal is to [mention your career aspiration, like becoming an investment banker or specializing in a specific area]. I believe an internship at your esteemed firm would provide the perfect platform to learn from experienced professionals, hone my skills, and gain valuable exposure to real-world deal execution. I'm confident that my dedication, work ethic, and genuine interest in the industry will make me a valuable asset to your team."

Remember: Tailor your response to your own experiences and interests. Research the specific bank and highlight aspects that resonate with you. Speak confidently and enthusiastically to showcase your genuine passion for the field.

🗞 Industry News

Markets Drop as Powell Speaks 🎤

The Federal Reserve kept interest rates unchanged at their highest level since 2001, emphasizing it won't consider rate cuts until inflation falls closer to its 2% target. Chair Jerome Powell downplayed market expectations for cuts as early as March, suggesting they're unlikely based on current data.

While acknowledging progress on inflation, Powell stressed the need for "more evidence" before easing rates. He mentioned December's PCE inflation dip but emphasized the desire for sustained decline. He declined to declare a "soft landing" for the economy, citing high core inflation.

Despite stronger-than-expected economic growth, the Fed characterized it as positive and expressed hope for strong growth and labor markets. However, further tightening isn't planned, with officials noting risks to price stability and employment are "moving into better balance." They also hinted at future "adjustments" to policy without mentioning additional hikes.

Market expectations shifted after Powell's comments, with March rate cuts now seen as unlikely and May cuts gaining favor.

Overall, the Fed's cautious stance highlights its commitment to inflation control despite positive economic signals, leaving rate cuts on hold for now.