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Accounting Basics for Investment Banking Accrual Accounting: Recognizing revenue and expenses when they are earned/incurred, not when cash changes hands. Financial Statement Analysis: Deep understanding of the three core statements: Income Statement: Shows profitability over a period (Revenue - Expenses = Net Income). Balance Sheet: Snapshots a company’s financial position (Assets = Liabilities + Shareholders' Equity). Cash Flow Statement: Tracks actual cash inflows and outflows (Operating, Investing, Financing activities).
Valuation Techniques: Discounted Cash Flow (DCF): Valuing a company based on the present value of its future cash flows. Comparable Company Analysis ("Comps"): Valuing a company based on market multiples (e.g., PV, EBIDTA) of similar public firms. Precedent Transactions: Analyzing multiples paid in previous M&A deals.
Key Skills Required Financial Modeling: Creating Excel-based models to project financial performance. Excel Proficiency: Advanced modeling, data analysis, and formula usage. Market Research: Analyzing economic trends, industries, and specific companies.
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