Road To Wall Street Prep Deck 100% Pass

Road To Wall Street Prep Deck 100% Pass Types of Assets -Public Equity -Public Debt -Private Equity -Private Debt Asset Class Overview -Public / Private Equities -Public / Private Debt -Fixed Income -Cash/Cash Equivalents -Alternative Assets -Derivative Instruments Capital Stack -Debt is more "senior than equity" Public Debt -Mandatory Payment: fixed cost -Leverage Equity -Ownership rights -Bottom of the capital structure Private Debt -Non-bank institutions who make loans to private companies or on the secondary markets -Multiple types: Direct lending Distressed debt, mezzanine and more -Private placement bonds do not require rating from credit agencies Private Equity -Consists of capital that is not listed on a public exchange -Investment requires substantial sums of money and long holding periods -Investors are paid through distributions -More risky and less liquid than public equity Time Value of Money -A dollar today is worth more than a dollar tomorrow Why Time Value of Money? -Opportunity cost: the dollar can be reinvested and earn interest over time Three Types of Financial Statements -Income Statement -Cash Flow / Operating Statement -Balance Sheet Income Statement -Lists all operational costs of the business as well as any income -It is always for a period of time (usually 1 year) -Shows Revenues, Expenses, Gains / Losses and Net Income Cash Flow Statement -A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company -Split into three sections Operating Activities Investing Activities Financing Activities Operating Activities -Refers to the amount of cash generated by the regular operating activities of a business within a specific time period Investing Activities -Refers to the purchase, sale and maturity of investments as well as any Capital Expenditures. -Includes anything that is used to enhance the business without being directly related to product sales Financing Activities -Refers to raising and paying off of debt as well as share actions (dividends, share buy-backs etc). Balance Sheet -Lists all assets and liabilities and shareholder's equity attributed to the company -A "snapshot" of one point in time Asset -What the company owns or is owed Liabilities -Any money the company may owe Shareholder's equity -What the shareholders own The balance sheet must always balane -Assets = Liabilities + Shareholders equity IB Breakdown -Industry / Coverage Groups -Product Groups -Capital Raising -Restructuring Industry/Coverage Groups -Includes C&R, Industrials, TMT, FIG, Real Estate / Gaming and Lodging, Oil and Gas / Energy, Natural Resources, Healthcare, Financial Sponsors -Focus more on knowledge of the industry, what different companies are doing Product Groups -Mergers and Acquisitions Advisory on a merger or to the buyer/seller in an acquisition (some banks do not have a M&A group) -Leveraged Finance Advice on raising and structuring of debt for non-investment grade companies and for financial sponsors conducting leveraged buyouts Capital Raising -DCM (Debt Capital Markets) Advice on raising and structuring of debt for investment-grade companies -ECM (Equity Capital Markets) Raise equity financing for companies in IPOs and follow on stock offerings -Restructuring Advisory to distressed companies that are facing, coping with, or recovering from Chapter 11 bankruptcy IB - Analyst Responsibilities -Grunt work on projects such as financial modeling, performing industry research, putting on pitch books and slide decks, organizing client data rooms -Will not be meeting company CEOs and board members IB - Exit Opportunities -Private Equity, Hedge Funds, Credit Funds, Venture Capital, Corporate Development / Strategy -Most analysts work for 2 years and then leave Equity Research -Produce reports and issue a recommendation (buy, sell, or hold) on stocks -Clients include: Asset Managers, Portfolio Managers, Hedge Fund Managers -Cover a specific industry similar to IBs -"Initiate coverage" which requires full DD on stocks -Continue coverage each quarter to provide updates to clients that will be buying the security-based off the recommendation Sales and Trading -Purchase and sell securities for clients or the IB -Work with specific investment areas (stocks, bonds, currencies, commodoties .etc.) -Manage risk, capital and security Sales -Relationship manager with clients and team -Create and pitch investment ideas -Provide self as a resource of information Trading -Manage portfolio -Assess risk associated with each transaction (Quantitative Analysis) -Market maker (liquidity) In-between roles for Sales and Trading -Analysts both communicate with clients and manage those relationships while creating pricing algorithms for trades -Strat - coders for quantitative electronic trading Key Skills for S&T -Personable, fast-thinker, big markets interest -Quantitative skills are more sought after these days Exit Opportunities for S&T -Asset / Investment / Wealth Management -Hedge Funds How the 3 Financial Statements Connect -Net income from the income statement flows to the balance sheet and cash flow statement -Depreciation is added back and CapEx is deducted on the cash flow statement, which determines PP&E on the balance sheet -Financing activities mostly affect the balance sheet and cash from finalizing, except for interest, which is shown on the income statement -The sum of the last period's closing cash balance plus this periods cash from operations, investing, and financing is the closing cash balance on the balance sheet