JPMorgan MMBSI Superday

Question 1

EBITDA formula

Answer 1

Add back taxes, depreciation and ammoritization

Question 2

Debt to equity formula

Answer 2

total debt / total shareholders’ equity

Question 3

Debt service coverage ratio

Answer 3

Ebitda / principal + interest

Question 4

Working capital cycle formula

Answer 4

days inventory outstanding (DIO) + days sales outstanding (DSO) - days payable outstanding (DPO)

Question 5

What is an income statement, and what does it show?

Answer 5

Shows a company’s performance over a specific period. Revenue - cogs, opex, interest and taxes and ENDS WITH NET INCOME

Question 6

What is a balance sheet, and what does it show?

Answer 6

A snapshot is a single point in time showing what the company owns and owes. Things like cash, inventory, and equipment, as well as debt and payables.

Question 7

What is the cash flow statement, and what does it show?

Answer 7

reconciles net income to actual cash. Important because companies can be profitable on the income statement but still have negative cash flow. Specifically look at cash flow from operations.

Question 8

What would you look at when deciding to give a loan to a company?

Answer 8

The most important thing is whether the company can pay you back. There are a couple key sections to focus in on. First I’ll start with the quantative.

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working capital cycle

Question 9

Working capital formula

Answer 9

current assets - current liabilities

Question 10

prioritize the financials of a company or its management team?

Answer 10

1. • the financials - we need objective proof that the company can service its debt and successfully operate a business

Question 11

What are the 5cs of credit

Answer 11

character / cash flow / collateral / capacity / conditions

Question 12

Character …

Answer 12

What are the length, depth, and quality of the relationships? What is the reputation of the management team and the company both internally and externally? applicants credit history and track record for paying debt.

Question 13

Cash flow..

Answer 13

Does the existing level of cash flow support repayment? How large is the cushion between cash flow generated and payment obligations?

Question 14

Collateral…

Answer 14

What is the secondary source of repayment if the primary source is impacted? What could impact the ability to get repaid from the source?

Question 15

Conditions

Answer 15

What macroeconomic risks could impact the business? How exposed are they? And has the management team been through a downturn before? If so, how did they handle it?

Question 16

Capacity

Answer 16

refers to the company’s ability to take on and repay new debt. Comparing income and recurring debts and by assesing their debt to income ratio.

Question 17

Why JPMorgan

Answer 17

Great question. I can answer this in two parts. Firstly, culture. At this point I have had over 15 phone calls/coffee chats with MMBSI bankers ranging from analysts to managing directors. Every single person I have spoken to has been incredibly supportive, answering all of my questions, providing insight into the industry, and giving me advice for my time at university. Even during the FSU school shooting when I was in lockdown, I had an analyst in the Miami office text me to make sure I was okay. That really was a turning point for me in saying, Okay, wow, the people at this company care about one another and value me even as a potential candidate. While everyone has been supportive and helpful, they are also extremely intelligent and know what they’re talking about right. And that is exactly the type of place I want to work. Surrounded by competent, intelligent people who are also down-to-earth and supporting a culture of learning and growth.

I want to service my clients best way possible and I can do that at JPMOrgan. Best people, best resources, and the best training program. the treasury/banking/credit roation shows the bank cares about its employees and provides them with the best platform to learn on.

Question 18

what makes a good commercial banker?

Answer 18

intellectual curiosity
strong interpersonal skills
understand credit agreements
strong problem solving skills

Question 19

Where are rates headed?

Answer 19

The current rate of 4.33, I believe, will stay flat or at the most get cut once for 250 basis points. The modern consumer is stretched to their limit; credit card defaults at 14 year high and consumer spending represents 68% of gdp. With inflation staying relatively flat combined with flat spending we risk stagflation. The current tarrif environment has severely damped economic outlook, increased inflation concerns, and halted business expansionary plans. I also worry that this first quarter of spending was actually driven by risk of tarrifs and people ordering things before tarrifs took full effect.

Question 20

Dealt with a difficult person?

Answer 20

tfs club roll up example

Question 21

How do you analyze data?

Answer 21

Firstly I need to know what I am looking for. “if a man knows not to which port he sails, any wind is favorable” so once I indentify the context of my analysis I have a structrued approach. I’ll take it from the lending perspective.

1. • analyze industry (top down) macro view and famialirize myself with the space
2. • Identify specific risks and opportunities within the industry
3. • Then I look at the companies finanical statements and asses their situation
4. • from there we look at the key ratios and see how much and what kind of debt they can service

Question 22

What technical skills do you have?

Answer 22

I have competed in multiple financial competitions and have spent a fair amount of time in Excel/PPT. However I think my greatest technical skillset is yet to come and that will be my 11 week long internship this summer with southstate where I’ll get hands on experience in their largest office.

Question 23

How do you work on a team?

Answer 23

I thrive, will not work in an industry thats not a team environment. I ahve spent my entire youth in sports and then my latter half of my life in leadreship roles. So in a team setting I often end up takiing on a leadership role whether that be officially titled or just natrual setting like a group project.

Question 24

In your words what is commercial banking?

Answer 24

Financial institutions dedicated to providing day to day banking services for business customers. This can be done through loans, lines of credit, treasury services. All with the goal of serving the client in the most efficient way possible and helping them attain their goals as business owners.

Question 25

How would rising interest rates impact the bank?

Answer 25

Let's look at this from two perspectives: firstly, the banks, and then our clients. In the short run, an increase in rates would lead to higher net interest income margins because loan yields would rise faster than deposit costs, which would boost profitability. in 2023 NII was roughly 90B up 34% from 2022. However, loan demand most likely would drop. Higher rates mean it costs more for businesses to borrow, which discourages borrowing. So from the client's side, if they have floating rate debt, they will see their expenses rise and increase default risk. Many companies also may delay or forego investment plans due to the increased borrowing risk.

Question 26

How does inflation impact the bank?

Answer 26

Rising inflation and rates meant higher loan repricing and higher net interest income but at the expense of deposit outflows and credit stress. Higher inflation means higher rates, which also means pressure on the deposits as client seek higher rate alternatives. Higher rates decrease demand and utilization. Prolonged higher inflation creates a negative economic outlook which means lack of expansion and less consumer spending.

Question 27

Solve a problem with limited information, example

Answer 27

The student foundation, freshman year, delegated funds to various clubs that needed them, and this club came in and pitched a presentation on a school trip but had no invoices; the cost breakdown was vague, and the event was that same month. So I consulted with my partners; we looked at past allocations similar to this and decided to approve it with the contingency that they were able to provide a hotel invoice and ALL receipts of food expenses. The trip ended up moving forward, and the club later submitted receipts as promised. WHAT I LEARNED WAS THAT IN SITUATIONS WHERE YOU HAVE LIMITED INFORMATION, IT'S IMPORTANT TO TRUST YOUR PROCESS. Act on available evidence and communicate expectations early on.

Question 28

Something you've been following in the market

Answer 28

Private credit. Worth over 2 trillion, the total market could be worth 30 trillion by 2030. While I think it has a place and serves its purpose, I think the notion that it's going to take any substantial share from banks is skeptical. The reduced transparency, limited liquidity, and default risk all make it a risky asset class. Oak Tree co-ceo just said he's seeing some private credit trades as low as 50cents on the dollar. 40% of private credit borrowers still have negative free cash flow at the end of 2024 up from 25% in 2021. Banks hold 500 billion of private credit exposure. Contagion risk is something to consider and the private space as a whole has a real transparency problem theres no daily markers and just like in 08 with the subprime crisis and those not being market approproiately we could maybe be seeing something similar now. This is why banks will continue to be the backbone of the lending space.

Question 29

Why MMBSI?

Answer 29

ability to work with, lifelong learn, anaylst rotational program is extremely attractive since I love learning.

Question 30

if you could only look at one financial statement, what would it be?

Answer 30

Cash flow statement, "cash is king" because it shows the true operating revenue of the business and how much cash their actually taking in. They can have positive net income but negative in cash flow. So this shows us how readily avaialble they are to pay our debt and interest payments. It is the most accurate and converstiave assesment of a companys short term health.