WTW Finance Jeopardy

IB

investment banking

what is investment banking?

Industry that provides advisory services to businesses, assists in obtaining debt and equity capital, and links borrowers and investors through trading activities

PE

private equity

what is private equity?

Buy-side industry that purchases private companies using debt and pooled money from investors to make operational changes to the businesses and sell them for a return

VC

venture capital

what is venture capital?

Buy-side industry that invests in very early-stage, beginning companies in hopes of making a return when they go public

S&T

sales and trading

what is sales and trading?

One of three primary sectors within IB. Consists of linking buyers and sellers, making markets, and executing trades to make a profit for both the investor and investment bank by capitalizing on the “spread” (purchase price < sell price)

ER

equity research

what is equity research?

The other sector of IB apart from actual investment banking. Consists of research analysts who interact with company management and create financial forecasts based on how they think a company’s stock will perform to help investors make better informed decisions

ECM

equity capital markets

what are equity capital markets?

Subset of investment banking. Consists of helping companies obtain capital via equity markets (IPOs or secondary offerings)

DCM

debt capital markets

what are debt capital markets?

Subset of investment banking. Consists of helping companies obtain capital via debt markets (Bonds/Commercial paper)

BB

bulge bracket

what is a bulge bracket?

The largest investment banks in the industry. (JP Morgan, Morgan Stanley, Goldman Sachs, Citi, Bank of America) Have many products and services and balance sheets that support underwriting activities

EB

elite boutique

what is an elite boutique?

Smaller investment banks (Lazard, PWP, Moelis, Evercore) that provide only advisory services (M&A or restructuring). Help very big companies and execute very large deals

MM

middle market

what is the middle market

Mid-sized investment banks (Stifel, RBC, BMO, HSBC) that typically serve mid-sized companies

LevFin

leveraged finance

what is leveraged finance?

Division of DCM that serves sub-investment grade companies – meaning they issue debt securities to companies who are at high risk for defaulting on their loans

IPO

initial public offering

what is an IPO?

When a company first issues shares of stock to the public, the proceeds are then used to fund operations and investments and the shares increase and decrease in price based on company performance

LBO

leveraged buyout

what is a leverage buyout?

When a private equity firm decides to buy a company, they purchase that company with a debt and use that company’s cash flow to pay off the debt. Basically, using leverage amplifies the returns for the private equity firm

recap

recapitalization/restructuring

what is a recap?

If a company has too much debt or too much equity, it can take out debt to buy back stock or issue stock to pay down debt, which changes its debt/equity ratio to the desired level

M&A

merger and acuqisitions

what is a merger and acquisition?

When a company decides to buy another company (acquisition) or companies of equal size combine (merge)

R&D

research and development

what is research and development

Companies can spend money on research and development for a new drug, technology, or other product (most common in tech or healthcare)

CapEx

capital expenditures

what are capital expenditures?

Large investments made by a company in Long-term or fixed assets, like a building or a factory overseas

Follow On

seasoned/ secondary offering

what is a follow on?

When a company issues additional shares after they have already gone public to raise capital

COGS

costs of goods sold

what are COGS?

Refers to the expenses that are linked directly to the sale of products/services contributing to revenue.

SG&A

selling, general, and admin expenses

what are SG&A?

Represent the day-to-day expenses associated with running a business. SG&A costs encompass a wide range of expenses and are incurred regardless of the level of production or sales.

EBIT

earnings before interest and tax

what is EBIT?

EBIT is a measure of a company’s operating performance and profitability before considering the impact of interest expenses and income taxes. EBIT is also referred to as operating income. EBIT = revenue - COGS - operating expenses

PTI

pre-tax income

what is PTI?

PTI is a measure of a company’s operating performance and profitability before considering the impact of income taxes. PTI = EBIT – Interest expense

NI

net income

what is net income?

The final amount of profit a company has earned after deducting all expenses, taxes, interest, and other financial items from its total revenue. It is a key indicator of a company’s profitability and is considered the bottom line of the income statement. Net income - revenues - COGS - expenes - taxes

D&A

depreciation and amortization

what is depreication?

the accounting practice used to spread the cost of a tangible or physical asset over its useful life. It represents how much of the asset’s value has been used up in any given time period.

what is amortization?

the accounting practice used to spread the cost of a intangible asset over its useful life. It represents how much of the asset’s value has been used up in any given time period.

CFO

cash flow from operations

what are cash flows from operations?

provides information about the cash generated/used by a company’s core operating activities during a specific period. Net income will flow in at the top from the income statement – then, you adjust for non-cash expenses, and take into account how operational balance sheet items have changed.

CFI

cash flow from investment

what are cash flow from investments?

Anything related to the company’s investments, acquisitions, and PP&E shows up here. Purchases are negative because they use up cash, and sales are positive because they result in more cash.

CFF

cash flow from financing

what are cash flows form financing?

Items related to debt, dividends, and issuing or repurchasing shares show up here. This section of the cash flow statement shows how the company is receiving and plowing out cash to fund its investing activities.

PP&E

property, plant, and equipment

RE

This represents the company’s saved-up, after-tax profits minus any dividends it has issued. Shows how much money a company is plowing back into itself / reinvesting. RE = Net income - dividends

STI

short-term investments

what are STI’s?

Refer to financial assets that are expected to be converted into cash or sold within a relatively short period, typically one year or less. They are less liquid than cash – for example: certificate of deposits (CDs) and money market accounts and such.

IRR

internal rate of return

what is IRR?

the interest rate that makes the present value of all cash inflows equal to the present value of cash outflows over the life of the investment. You can think of it as the rate of return that makes an investment break even.

WACC

weighted average cost of capital

what is WACC?

the rate a company would have to pay for its current amount of capital. It’s the average of their cost of debt (interest rate), cost of equity, and cost of preferred stock, weighted based on the proportion the company has of each of those. IRR has to be greater than WACC for it to be a sound investment.

ROIC

return on invested capital

what is ROIC?

a company’s efficiency in allocating capital to profitable investments. It gives a sense of how well a company is using its capital to generate profits.

TAM

total addressable market

what is TAM?

How much revenue a company could theoretically earn if they faced zero competition. Can also be looked at as the number of people or consumers who would viably purchase that company’s product or service

CAGR

compound annual growth rate

what is CAGR?

How much a certain measure (such as revenue) is growing each year

Fx

foreign exchange

what if FX?

Importing and exporting from other countries or trading currencies – the exchange rate indicates the spread between one currency and another

soft landing

When the stock market experiences high inflation and looks to be heading toward a recession, but interest rates ease at a pace in which the market regulates more gradually without a full-blown recession

bull market

economic conditions are favorable (low interest rates, low unemployment) and stock prices are expected to rise in the future

bear market

economic conditions are unfavorable and stock prices are expected to decline in the future or are experiencing relative lows

headwinds

A company experiences challenges/obstacles in its macroenvironment (Supply chain constraints, inflation, tightened consumer spending)

tailwinds

A company experiences benefits/something that helps earnings in its macroenvironment (Shift in consumer preference toward their product, decreased competition, price decreases on supply side)

voltality

how fast a stock moves up and down

holding period

How long you plan to hold an investment for, can be used to gauge the internal rate of return

leverage

how much debt a company is holding

hedge

Mitigate against the decline of a particular investment (risk-management)

yield

measure of the return on an investment