Night Before Prep

Question 1

Walk me through a transaction in your resume?

Answer 1

Interviewers seek depth overview oy your deal experience and depth of knowledge

• Provide background on deal thesis and rationale
• Business plan
• Capital sources and allocation
• Underwriting: (Assumptions, hold period)
• Financial metrics (Entry / Exit EBITDA Multiples, Returns)
• Main risks & upsides
• Personal contribution & value addition

Question 2

What is the impact of a $100 dip in dep expense on the financial statements?

Answer 2

• Think of a company like a car
• Depreciation is the cost of the car’s wear and tear over time
• If you suddenly find out that your car isn’t wearing down as quickly as you thought (the $100 dip in depreciation) you are essentially saying that your car will retain its value for a longer period therefore you are more profitable.
• Because you are more profitable you pay more taxes
• Your cash goes down by the amount of taxes paid
• In your balance sheet your car appears more vauable and your equity improves because you managed your resources better.

Question 3

Explain me the three financial statements

Answer 3

• Income statement: shows revenues and expenses over time. The IS its like a budget as it tells you how much you made, how much you spent and how much you either saved or overspent
• Cash Flow Statement: Details the actual inflows and outflows of cash. Keep in mind that you can have both revenues and expenses that are not necessarily in cash so this statement helps you understand cash movements only
• Balance Sheet: Tell you how much are your assets and how you have financed those assets with debt and equity.