Hi monkeys
Having secured an 1st interview in an Activist equity hedge fund, technicals will be part of it.
Question I have is, what should I prep for, I.e. what accounting topics are likely to come up in a public activism context? Things such as equity method of accounting, NCI accounting etc.?
I feel confident on rather standard IB, PE like questions so wanted to prep for any new topics.
Any insight is highly appreciated. Thanks!
Hey there,
Congrats on securing the interview! In an activist equity hedge fund context, you might want to brush up on the following accounting topics:
Equity Method of Accounting: This is used when an investor has significant influence over an investee but not full control, like in joint ventures. Understanding this method is crucial as it can impact the investor's reported earnings and net worth.
Non-Controlling Interest (NCI) Accounting: This is relevant when a company owns less than 100% of another company. The portion of equity that is not owned by the parent company is the NCI. It's important to understand how this is reported in the consolidated financial statements.
Consolidation Accounting: This is used when a parent company owns more than 50% of another company. The financial statements of the parent and subsidiary are combined, and intercompany transactions are eliminated.
Earnings Quality: Activist investors often look at earnings quality to assess the sustainability of earnings. This includes understanding non-recurring items, revenue recognition policies, and other factors that could inflate or deflate earnings.
Shareholder Equity: Understanding the components of shareholder equity, including retained earnings, common stock, and treasury stock, is crucial. Activist investors often focus on maximizing shareholder value.
Financial Analysis: Be prepared to analyze financial statements and ratios to assess a company's performance and financial health.
Remember, the goal of an activist investor is to effect change within a company to increase shareholder value. So, any accounting topic that helps you understand a company's true financial position could be relevant.
Best of luck with your interview! You've got this!
Sources: Q&A - Public Accounting to Top MBA, Need to Brush up on your Accounting Skills?, how comfortable should I be with accounting/valuation concepts?
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