IAfinancialworkshop firstname.lastname@example.org Investment Banking WorkshopProgram Objective The key objective of this training program is to prepare participants for “Careersin investment banking” This one-day course aims to provide a "Toolkit" for a successful .career in investment banking (Advisory + Markets). The course is "Case-based" and willaim at preparing students for recruiting events in investment banks and consulting firms.There is no pre-requisite finance knowledge in attending this course. This course ispractical in rigor and is case based.Course Outline Investment Banks: Landscape Finance 101 Advisory: M&A, PE and VC Markets: Products, Market Making Interviews: How do I make the cut?Time & Venue 5 hrs; Venue TBDTrainer The trainer is currently employed by a bulge-bracket investment bank. Prior to hiscurrent role, he was a trader at an investment bank on Wall Street. In addition, the facultyhas worked on investment banking advisory deals and corporate strategy mandates.Workshop Pre-requisites Bring notepad, pen; course materials will be distributed during the workshop Bring your calculator Laptops are optional
IAfinancialworkshop email@example.com Corporate Finance: Sample Glossary of TermsBalance Sheet: A balance sheet provides detailed information about a company’ assets, sliabilities and shareholders’equity.Assets: Assets are things that a company owns that have value. This typically means theycan either be sold or used by the company to make products or provide services that canbe sold. Assets include physical property, such as plants, trucks, equipment andinventory. It also includes things that can’ be touched but nevertheless exist and have tvalue, such as trademarks and patents. And cash itself is an asset. So are investments acompany makes.Current Assets are things a company expects to convert to cash within one year. A goodexample is inventory. Most companies expect to sell their inventory for cash within oneyear.Noncurrent Assets are things a company does not expect to convert to cash within oneyear or that would take longer than one year to sell. Noncurrent assets include fixedassets. Fixed assets are those assets used to operate the business but that are not availablefor sale, such as trucks, office furniture and other property.Liabilities: Liabilities are amounts of money that a company owes to others. This caninclude all kinds of obligations, like money borrowed from a bank to launch a newproduct, rent for use of a building, money owed to suppliers for materials, payroll acompany owes to its employees, environmental cleanup costs, or taxes owed to thegovernment. Liabilities also include obligations to provide goods or services to customersin the future.Liabilities are said to be either current or long-term. Current liabilities are obligations acompany expects to pay off within the year. Long-term liabilities are obligations duemore than one year away.Shareholders’equity is sometimes called capital or net worth. It’ the money that would sbe left if a company sold all of its assets and paid off all of its liabilities. This leftovermoney belongs to the shareholders, or the owners, of the company. Assets = Liabilities + EquitiesShareholders’equity is the amount owners invested in the company’ stock plus or minus sthe company’ earnings or losses since inception. Sometimes companies distribute searnings, instead of retaining them. These distributions are called dividends.
IAfinancialworkshop firstname.lastname@example.orgIncome Statement: An income statement is a report that shows how much revenue acompany earned over a specific time period (usually for a year or some portion of a year).An income statement also shows the costs and expenses associated with earning thatrevenue. The literal “ bottom line” of the statement usually shows the company’ net searnings or losses. This tells you how much the company earned or lost over the period.Income statements also report earnings per share (or “EPS” This calculation tells you ).how much money shareholders would receive if the company decided to distribute all ofthe net earnings for the period. (Companies almost never distribute all of their earnings.Usually they reinvest them in the business.)Depreciation takes into account the wear and tear on some assets, such as machinery,tools and furniture, which are used over the long term. Companies spread the cost ofthese assets over the periods they are used. This process of spreading these costs is calleddepreciation or amortization. The “ charge” for using these assets during the period is afraction of the original cost of the assets.Earnings per Share or EPS: Most income statements include a calculation of earnings pershare or EPS. This calculation tells you how much money shareholders would receive foreach share of stock they own if the company distributed all of its net income for theperiod. To calculate EPS, you take the total net income and divide it by the number ofoutstanding shares of the company.Cash Flow Statement: Cash flow statements report a company’ inflows and outflows of scash. This is important because a company needs to have enough cash on hand to pay itsexpenses and purchase assets. While an income statement can tell you whether acompany made a profit, a cash flow statement can tell you whether the companygenerated cash.A cash flow statement shows changes over time rather than absolute dollar amounts at apoint in time. It uses and reorders the information from a company’ balance sheet and sincome statement.The bottom line of the cash flow statement shows the net increase or decrease in cash forthe period. Generally, cash flow statements are divided into three main parts. Each partreviews the cash flow from one of three types of activities: (1) operating activities; (2)investing activities; and (3) financing activities.Operating Activities: The first part of a cash flow statement analyzes a company’ cashsflow from net income or losses. For most companies, this section of the cash flowstatement reconciles the net income (as shown on the income statement) to the actualcash the company received from or used in its operating activities. To do this, it adjustsnet income for any non-cash items (such as adding back depreciation expenses) andadjusts for any cash that was used or provided by other operating assets and liabilities.
IAfinancialworkshop email@example.comInvesting Activities: The second part of a cash flow statement shows the cash flow fromall investing activities, which generally include purchases or sales of long-term assets,such as property, plant and equipment, as well as investment securities. If a companybuys a piece of machinery, the cash flow statement would reflect this activity as a cashoutflow from investing activities because it used cash. If the company decided to sell offsome investments from an investment portfolio, the proceeds from the sales would showup as a cash inflow from investing activities because it provided cash.Financing Activities: The third part of a cash flow statement shows the cash flow from allfinancing activities. Typical sources of cash flow include cash raised by selling stocksand bonds or borrowing from banks. Likewise, paying back a bank loan would show upas a use of cash flow.Financial Statement Ratios and CalculationsDebt-to-equity ratio compares a company’ total debt to shareholders’equity. Both of sthese numbers can be found on a company’ balance sheet. To calculate debt-to-equity sratio, you divide a company’ total liabilities by its shareholder equity, or sDebt-to-Equity Ratio = Total Liabilities / Shareholders’ EquityIf a company has a debt-to-equity ratio of 2 to 1, it means that the company has twodollars of debt to every one dollar shareholders invest in the company. In other words, thecompany is taking on debt at twice the rate that its owners are investing in the company.Inventory turnover ratio compares a company’ cost of sales on its income statement with sits average inventory balance for the period. To calculate the average inventory balancefor the period, look at the inventory numbers listed on the balance sheet. Take the balancelisted for the period of the report and add it to the balance listed for the previouscomparable period, and then divide by two. (Remember that balance sheets are snapshotsin time. So the inventory balance for the previous period is the beginning balance for thecurrent period, and the inventory balance for the current period is the ending balance.) Tocalculate the inventory turnover ratio, you divide a company’ cost of sales (just below sthe net revenues on the income statement) by the average inventory for the period, orInventory Turnover Ratio = Cost of Sales / Average Inventory for the PeriodIf a company has an inventory turnover ratio of 2 to 1, it means that the company’ sinventory turned over twice in the reporting period.Operating margin compares a company’ operating income to net revenues. Both of these snumbers can be found on a company’ income statement. To calculate operating margin, syou divide a company’ income from operations (before interest and income tax sexpenses) by its net revenues, orOperating Margin = Income from Operations / Net RevenuesOperating margin is usually expressed as a percentage. It shows, for each dollar of sales,what percentage was profit.
IAfinancialworkshop firstname.lastname@example.orgP/E ratio compares a company’ common stock price with its earnings per share. To scalculate a company’ P/E ratio, you divide a company’ stock price by its earnings per s sshare, orP/E Ratio = Price per share / Earnings per shareIf a company’ stock is selling at $20 per share and the company is earning $2 per share, sthen the company’ P/E Ratio is 10 to 1. The company’ stock is selling at 10 times its s searnings.Working capital is the money leftover if a company paid its current liabilities (that is, itsdebts due within one-year of the date of the balance sheet) from its current assets.Working Capital = Current Assets –Current LiabilitiesSource: sec.gov
IAfinancialworkshop email@example.com Snippets of Macro Overview In cutting the U.S. one step to AA+ on Aug. 5, S&P cited the weakening“effectiveness, stability and predictability of American policymaking and politicalinstitutions.” Warren Buffett, the world’ most successful investor, said S&P erred and sthe U.S. should be rated “ quadruple-A.” So, does that make demand for US Treasuries .weaker? De0mand for U.S. debt was on display on August 10, 2011 as the Treasuryauctioned $24 billion of 10-year notes at a record-low yield of 2.14 percent. The bid-to-cover ratio, a gauge of demand which compares total bids with the amount of securitiesoffered, was 3.22, versus an average of 3.11 at the previous 10 sales. The amount ofmarketable U.S. government debt outstanding has risen to $9.4 trillion from $4.34 trillionin mid-2007 as the government borrowed to bail out the nation’ banking system and sspurs the economy out of recession. The U.S. is poised to run a budget deficit of $1.6trillion this fiscal year. Yields on corporate bonds rated AAA have risen from 58 basispoints more than Treasuries in April. The spread averaged about 75 basis points, or 0.75percentage point, from 1998 through 2001, the last time the U.S. had budget surpluses.“This is indicative of investors viewing Treasuries as the risk-free benchmark,”said JohnMilne. J&J’ Company position: Is it mightier than US credit? s J&J bonds yield 57 basis points on average more than similar-maturity Treasuries,Bank of America Merrill Lynch index data show. Securities issued by Redmond,Washington-based Microsoft, the world’ largest software maker, pay a spread of 55 sbasis points. J&J, based in New Brunswick, New Jersey, had $29.7 billion of cash andshort-term investments as of July 3, compared with $13.7 billion of long-term debt,according to a regulatory filing. That ratio, combined with the company’ stable and sgeographically diverse businesses, accounts for its top rating, according to MichaelKaplan, a managing director at S&P. “ They have more cash than debt on their balancesheet,” Kaplan said in a telephone interview Aug. 10. “ s general knowledge that the It’U.S. government has a lot more debt relative to those factors that we consider importantthan J&J does. Based on our criteria, J&J is a stronger credit.”So, if we believe J&J is astronger credit; why does J&J trade wider than US treasuries? Are all ratings comparable? Ratings should represent the same level of creditworthiness across the spectrum ofassets, S&P President Deven Sharma said in a speech on Sept. 21. “ goal is to have Ourour AAA ratings, or our A ratings, reflect a comparable view of creditworthiness in oneasset class, or one country, as any other, whether it is applied to a Japanese bank or a U.S.municipal,” Sharma said. It’ not unprecedented for a country to have domestic scompanies that are rated higher than their government while paying bigger yields on theirdebt. Sao Paulo-based Cia. de Bebidas das Americas, or Ambev, is Latin America’ s
IAfinancialworkshop firstname.lastname@example.org brewer and is rated A- by S&P. Its notes due in September 2013 yield 1.64percent, according to Trace, the bond-price reporting system of the Financial IndustryRegulatory Authority. Those of BBB- ranked Brazil that mature in June 2013 yield 0.8percent, Bloomberg data show. Sovereign Borrowers S&P gives 18 sovereign borrowers its top AAA ranking, including Australia, HongKong, France and the Isle of Man, according to a July report. The U.K., which isestimated to have debt that is 80 percent of its gross domestic product this year, or 6percentage points higher than the U.S., also has the top credit grade. Is UK next?Source: "Clarity Eludes Investors as AAA Companies Yield More Than U.S." by ByJohn Detrixhe and Zeke Faux