Investment Banking

Commercial bank: accepts deposits from customers (retail depositors, commercial depositors etc. and makes consumer and commercial loans using these deposits. It may also offer anciliary services like credit cards Investment bank: acts as an intermediary between companies and investors. Does not accept deposits, but rather sells investments, advises on M&A, etc. Loans and debt/equity issues…...

PIK interest (“paid-in-kind”) is a form of non-cash interest, meaning the borrower compensates the lender in the form of additional debt as opposed to cash interest. PIK interest typically carries a higher interest rate because it has a higher risk to the investor (i.e.,delayed payments result in less certainty of being paid). From the perspective…...

Industry Cyclicality: A potential LBO contender should produce steady cash flow. Therefore,from a risk perspective, an investment is less appealing when revenue and demand changes arevery cyclical and reliant on the current economic conditions (or other external variables). Customer Concentration: As a general rule, no one customer should represent more than 5–10% of total revenue…...

An LBO is the purchase of a business, whether it is privately held or publicly listed, in which a sizeable portion of the purchase price is financed by debt. The remaining sum is covered by equity contributions from the financial sponsor, and, in some situations, stock transfers made by the current management team of the…...

A non-binding agreement that outlines the basic terms & conditions of an investment. It serves as a model for creating more comprehensive, binding documents. Favorite… To get access, please buy CA Interview Question Bank...

Equity dilution is the reduction in shareholders’ stock holdings in a firm. Whenever shareholders provide equity ownership to external investors (like private equity firms) in return of money, it is called equity dilution. Favorite… To get access, please buy CA Interview Question Bank...

Pre- Money Valuation – Pre-money valuation is the value of a firm before any outside capital in most recent/proposed round of funding has been added. Pre-money is best defined as the potential value of a start-up before it starts to receive outside funding. This valuation not only provides investors with a sense of the current…...

There are 8 Stages of funding given below: • Pre-seed funding stage • Seed funding stage • Series A funding • Series B funding • Series C funding • Series D funding and beyond • Exit via IPO Favorite… To get access, please buy CA Interview Question Bank...

Capital invested in a business or other entity that is not publicly listed or traded is known as private equity.Private Equity investors prefer to invest in stable companies, whereas Venture Capital (VC) investors usually come in during the start-up phase. Favorite… To get access, please buy CA Interview Question Bank...

Dry powder is the amount of committed but unallocated capital that a venture capital (VC) or private equity (PE) company has on hand. It is, in other words, a cash reserve that has not yet been invested. Investors and businesses strategically use dry powder, a highly liquid asset, to achieve financial success. Favorite… To get...

Strategic buyers must carefully analyse purchases based on how the targets will “tie in” with their existing company and business units since they frequently incorporate the acquired business into a larger corporation. Moreover, strategic buyers are primarily interested in acquiring the company to achieve synergies in long run. Financial buyers, on the other hand, typically…...

A financial buyer is a type of acquirer in an M&A that is primarily interested in a buying the company with an intention to sell later at some point, thereby generating returns. These buyers see companies as projects and have some exit strategies. Private Equity firms’ investments can be a good example of financial buyers…....