Josh, Author at Finance Interview Coach

Published On - January 18, 2022

If the balance sheet doesn’t balance, what does that mean? How can you fix that or prevent that while building a 3-statement financial model or LBO model?

Assets = Liabilities + Shareholder’s Equity Above is the balance sheet equation, which is saying that all assets must be funded by either liabilities (e.g. debt) or shareholder’s equity (e.g. money from private or public investors). If the equation does not balance, that means there is an error ...

Published On - January 14, 2022

Josh Behaviorals and Fit, Investment Banking

What’s Your Greatest Weakness?

Contrary to popular belief, you do want to give a real weakness instead of a “fake” weakness. However, you must frame it in a way that shows you have a strong awareness about this weakness, and have made significant steps to improve. Try to avoid cheesy weaknesses like “work too hard.” Weakn...

Published On - January 12, 2022

Josh Investment Banking

Walk me through a DCF.

• Understand the company and the industry in which it operates on a forward-looking basis• Make key assumptions about revenue growth, gross margins, SG&A, capex, etc.• Project unlevered free cash flows, typically 5 – 10 years• Derive terminal value by using perpetuity growth method...

Published On - January 10, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What is net working capital?

Net working capital represents the money tied up in the daily operations of the business. This includes both current assets and current liabilities. On the current assets side, we typically include accounts receivable, inventory, and prepaid expenses as part of net working capital. All these items w...

Published On - January 8, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What are the most important items to due diligence in an LBO?

Some of the most important due diligence is done on the industry, and this can include competitor analysis, pricing trends, volume analysis, and speaking with industry experts. Due diligence will also be done on the company’s growth and cost strategy, customers, customer contracts, products, distr...

Published On - January 7, 2022

Josh Investment Banking

Walk me through the 3 financial statements.

The income statement shows how profitable or unprofitable your business is. It typically contains revenue, COGS, SG&A, which gets you down to EBITDA, and then contains depreciation and amortization, interest, and tax, which gets you down to net income. The cash flow statement shows the cash comi...

Published On - January 6, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What are the most important items to due diligence in an M&A deal?

The due diligence process for an M&A deal typically involves questioning and confirming all key aspects of the business, especially the growth trajectory of the business and industry. PE firms will often hire 3rd parties to help out with different aspects of due diligence. Some of the most impor...

Published On - January 5, 2022

Josh Investment Banking

How would you rank M&A financing methods from cheapest to most expensive?

Cash on balance sheet: No need to access capital markets for financing,the only cost is the opportunity cost of the cash. Debt: Interest expense is after-tax, so there is a tax shield here. Also,debt holders have higher priority on assets in case of a bankruptcy, sothey have less risk. Stock: Issuin...

Published On - January 4, 2022

Josh Investment Banking

What are the top 5 questions you would ask management if you were building a DCF?

How does your revenue model work, what are your growth drivers for revenue and how does revenue growth look going forward? What are your gross margins and do you expect improvement? How is SG&A driven (eg % change vs. % of sales) and how does that look going forward Who are your competitors and ...

Published On - January 2, 2022

Josh Investment Banking

Walk Me Through an Accretion / Dilution Analysis for an M&A Transaction.

Make transaction assumptions: consideration (cash, debt, or equity),transaction fees, synergies, etc. 1. Combine income statements of the acquirer and target2. Adjust income statement and shares outstanding accordingly tofinancing terms • Add synergies • Adjust for additional expenses (transacti...