Asset Based Finance Interview Flashcards
What attracted you to Sixth Street?
I applied to this position because I had a positive experience interviewing with Sixth Street for a direct lending position about two months ago. During that conversation with Maddy Livingston, I was able to learn a lot more about the firm’s “One Team” culture and Apprenticeship Approach for interns, which maintains a balance between shadowing and direct involvement. Beyond this, the main reason I want to work for Sixth Street is that I believe it is a company I can grow with and stay with long-term. The firm’s rapid expansion is apparent, with over 550 employees and over 75 billion in assets in only 14 years. Even with this rapid growth, I believe it is somewhere where I’d be able to work with small teams, learn from experienced professionals, and progress internally, instead of having to look externally for a new position. Trust me, I’ve moved around enough in my life, so the idea of working for a single company for more than a couple of years is a welcomed one. Especially, when most things I’ve seen praise Sixth Street’s positive culture.
Why are you interested in asset-based finance?
I am interested in asset-based finance because the lending type is growing rapidly, the position would allow me to work in a wide array of industries such as renewables and energy finance or consumer asset classes, and most importantly, ABF impacts every aspect of an individual’s daily life. Whether it is home mortgages, auto and student loans, or royalties from streaming Netflix or listening to music, the ability to secure asset-based loans is crucial for millions of individual borrowers and mid-sized companies. I will admit that it hasn’t been the easiest figuring out what I want to do with my eventual degree in finance, but I know that I want my work to make some semblance of a difference in the lives of others, and I believe that pursuing a career in ABF allows me to do that.
Balance Sheet Components
Assets: Cash, Accounts Receivable, Inventory, PPE, Intangibles
Liabilities: Accounts Payable, Unearned Revenue
Shareholders Equity: Retained Earnings
Describe a time when you had to work closely with others on a project. What was your role, and what was the outcome?
Two years ago, I worked with a team of five other undergraduates to provide pro-bono consulting services for a non-profit in the Philadelphia area that supports adults with vision loss and blindness. Our task was to streamline the company’s array of technological platforms to save money and make work less complex for employees. This presented numerous challenges, namely the fact that we had to understand each software (many of which we had never used), their purposes regarding daily operations, and how each level of the non-profit would be affected by our recommendations. My role was to test these software, research their applications, and compare their capabilities and overlap to how they were being used by the non-profit. As a team, we combined this data with price points for each software to determine which programs were necessary. We also gathered qualitative data from employees, and through numerous iterations of testing the different software, we saved the non-profit roughly $20,000 annually. More importantly, we also received multiple emails or comments from employees thanking us for simplifying hybrid work so that they could spend more time with their families.
Cash flow statement components
Three parts: Investing, Financing, and Operating
Direct vs. Indirect: Direct is anything with cash, and indirect is anything with a different effect on net income vs. cash
Tell me about a time you failed? How did you respond?
FNCE 101 story
How do you plan to contribute to the ongoing success of Sixth Street, and what do you hope to learn or achieve through this role?
What I bring to the table is simple: I will work my butt off no matter the task and take every day of the ABF internship to learn professionally and grow as a person. By applying this mindset, I hope to improve my financial modeling and quantitative skills, meet and learn from countless new people, and return to Sixth Street’s ABF branch full-time.
Where do you see yourself in five years, and how does this role with Sixth Street help you achieve your career objectives?
I see myself as an associate in private lending, and if I am able to intern with and return to Sixth Street following graduation, I will still be with the firm. Like I talked about before, I don’t like the idea of bouncing from firm to firm every two years. I am a very loyal person, and I know that would also apply to whatever company I work for in the future.
What steps have you taken recently to improve your financial analysis or investment evaluation skills?
Since this semester began in January, I have been taking classes on Wall Street Prep and securing certificates in topics such as FP&A, Excel, and Equities. These online courses have been taken while I am also enrolled in six classes at Wharton, such as Investment Management, ESG Investing, and Accounting 102, which have prepared me for a role in investment analysis.
Sixth Street Values (CREATE)
C
Cross-Platform
We think across the business and avoid silos at all costs.
R
Responsibility
We are accountable for our business, our team, and our communities.
E
Ethical
We are ethical and direct in word and deed.
A
Action
We initiate, execute and deliver results.
T
Teamwork
We are better together.
E
Entrepreneurship
We seek to innovate both inside and outside our business.
Income Statement Components
Revenue.
Expenses: COGS, Depreciation, etc.
What do you believe sets Sixth Street apart from its competitors in terms of investment strategy and culture?
In my opinion, the biggest thing that sets Sixth Street apart is its cross-platform focus and ability to avoid silos. This is only possible due to the firm’s size, diverse expertise, and commitment to the “one team” philosophy that emphasizes collaboration and mutual respect. It is impossible to work with other branches if you do not know them or do not trust their input on a project.
Describe the various valuation methods you are familiar with.
The three main methods I am familiar with are comparable company analysis, comparable transaction analysis and discounted cash flow analysis or dcf analysis.
As for the definitions of each of these, a comparable company analysis allows you to value a company by finding similar public companies that have readily observable market prices and comparing those public companies to the one you are attempting to determine a valuation for.
For a comparable transaction analysis, we would value a company by looking at the amount buyers have paid to acquire similar companies in the recent past.
The dcf analysis values a company by looking at the future cash flows it can generate, discounting them to the present value of the business.
I am also aware of LBO analysis and liquidation analysis, but I am less familiar with them and how to build them.
When would you use a DCF analysis versus comparable company analysis?
A DCF analysis is chosen for a detailed, intrinsic valuation based on future expectations, while CCA is used for a market-based, comparative approach. It makes more sense to use a DCF if it is a long-term investment decision where you have more time to make a decision, access to reliable and detailed financial forecasts for a company, and/or the business is difficult to compare to others in an industry.
Can you discuss a recent market trend and its implications for asset-based lending?
The failures of Silicon Valley Bank and other regional banks 11 months ago led to many U.S. regional banks becoming more strategic with their balance sheets. Regional banks have sold some of their assets and taken a step back both from providing capital and buying assets from specialty finance platforms throughout the United States. That has allowed ABF to step in and fill the void as either the capital provider or the buyer for those assets.
