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Happy Thursday, future bankers!

Markets have been frantically processing all of the earnings reports that are being released. Despite the flurry of information, markets closed mostly flat for the day.

🚀 Let’s get into it.

🔢 Technical Question

“Is there a rule of thumb that can be used to determine whether an acquisition will be accretive or dilutive?”

While evaluating acquisitions, understanding whether they will be accretive or dilutive is crucial. While there's no magic formula, some quick checks can offer initial insights. Let's explore some rule-of-thumb approaches:

1. Cash/Debt Deals:

• Compare the cost of financing to the target's pre-tax income: In a purely cash and debt deal, sum up the interest expense for debt and the foregone interest on cash (assuming it could be earning the risk-free rate). If this cost exceeds the target's pre-tax income, the acquisition's likely dilutive. This is because the additional financial burden outweighs the immediate earnings gain.

2. All-Stock Deals:

• Leverage the P/E Ratio shortcut: If the target's P/E ratio is higher than the acquirer's, the deal's likely dilutive. Conversely, a lower P/E suggests potential accretion as the target contributes more earnings per share. However, remember this only considers current valuations and ignores future synergies.

3. Mixed Deals:

• Complexity reigns supreme: When the deal involves a cocktail of cash, stock, and debt, there's no quick mental math hack. Building a detailed financial model becomes essential. This model factors in the financing cost, share issuance dilution, potential synergies, integration expenses, and accounting adjustments to paint a complete picture of the impact on future EPS.

🗣 Behavioral Question

"What is your greatest weakness?"

Answering the classic "greatest weakness" question requires a strategic approach. Here's how you can craft a strong response:

1. Choose a Weakness: Pick a real, but non-critical weakness relevant to the role. Avoid generic answers like "perfectionism" or "being too hard-working." Instead, consider areas you're actively working on, such as:

• Public speaking: "While I'm comfortable presenting in smaller groups, larger audiences can sometimes make me nervous. I've been actively participating in Toastmasters to improve my communication skills and presence."

• Technical skills: "My financial modeling skills are strong, but I'm still developing my expertise in advanced valuation techniques. I'm currently taking online courses to fill this gap and feel confident I can quickly get up to speed in an actual project."

• Delegation: "I take ownership of tasks seriously and can sometimes struggle with delegating to others. I've learned to break down projects into smaller tasks and provide clear instructions, which has significantly improved my teamwork and efficiency."

2. Demonstrate Self-Awareness: Acknowledge your own learning curve and the steps you're taking to improve. This shows self-reflection and a commitment to personal growth.

3. Quantify Your Progress (Optional): If relevant, briefly mention specific achievements or milestones you've reached in addressing your weakness. This adds credibility and showcases your progress.

4. Connect to the Job: Briefly explain how you've addressed this weakness within a similar context, like a class project or internship. This demonstrates transferable skills and your ability to adapt in a professional setting.

Example Response:

"One area I'm actively working on is public speaking. While I'm comfortable presenting in smaller groups, larger audiences can sometimes make me nervous. To overcome this, I've been participating in Toastmasters and have already noticed a significant improvement in my communication and confidence. I recently delivered a presentation to a mock client committee in my Finance class, and the positive feedback I received solidified my progress. I'm confident that with continued practice, I can effectively communicate complex financial concepts to any audience, which is crucial for success in investment banking."

Remember:

• Be honest and genuine, but avoid negativity.

• Focus on a weakness you're actively improving, not one that hinders your job performance.

• Quantify your progress to add credibility.

• Connect your weakness to the specific role and demonstrate transferable skills.

By following these tips, you can present your "greatest weakness" as an opportunity for growth and showcase your proactive approach to self-improvement, leaving a positive impression on your interviewers.

🗞 Industry News

Tesla’s Earnings Come in Cold

In Q4, Tesla reported lower-than-expected earnings, with revenue of $25.17 billion and adjusted EPS of $0.71. The full-year production outlook was cautious, indicating a potential lower growth rate in 2024 due to the launch of the next-gen vehicle at Gigafactory Texas. Despite challenges, Tesla achieved a record 484,507 deliveries in Q4, exceeding estimates, with annual vehicle deliveries growing 38% to 1.81 million.

Elon confirmed progress on Tesla's next-gen platform, describing it as revolutionary and expecting the low-cost vehicle to enter production in the second half of 2025. The drop in profitability is attributed to margin pressure and various factors, including Hertz shedding EVs and production challenges. Musk addressed concerns about control, expressing worries about potential loss of influence and being voted out by major shareholder advisory firms for Tesla's AI ambitions. These factors contributed to a decline in Tesla's stock and raised questions about its future trajectory. Read more below.