Monkey to Millions | Grace (Session 7) - Coronavirus and IB Mock Interview - Mar 27, 2020
About
In Grace's 7th session, we talk about the new realities of life and recruiting with Coronavirus moving Fordham classes online. We also spend a good chunk of this session doing a mock interview with some technical questions around the market, recessions and questions she should be ready for...listen to what I think she needs to keep working on to make sure she is super polished when interviews start back up.
Listen to the Monkey to Millions Podcast:
Or Listen to the Podcast Here:
Apple Podcasts
Spotify
Stitcher
Resources:
WSO Podcast (Episode 7) Transcript:
Patrick (CEO of WSO): [00:00:23] Hello and welcome, I'm Patrick Curtis, chief monkey of Wall Street Oasis, and this is monkey to millions. A show where you get a front row seat as I mentor young students and professionals to try and help them break into their dream jobs in the first cohort. You'll meet four students, all preparing for intense job interviews while trying to also balance a personal life and schoolwork. The goal of this show is to shine a light on the struggles of trying to break into competitive positions with a non-traditional background and to give you a roadmap for your own success. My hope is that as you get to know these four impressive students, you were inspired to dream big. Remember, these are real people, and this is their true story. Let's get to it. In Grace's seventh session, we talk about the new realities of life and recruiting with coronavirus moving forward and classes online. We also spend a good chunk of this session doing a mock interview with some technical questions around the market or sessions and basically any questions you should be ready for. Listen to what I think she needs to keep working on to make sure she is super polished when interviews start back up. But first hear from grace over the previous few weeks leading up to this session, so it's been an interesting few weeks. Yesterday, my school announced that they're moving all classes online for the rest of this week and then after spring break for the rest of March, and they're urging everyone to move off campus and go home. I got special permission to stay in housing so that I can go into my internship. I guess the week after spring break that last week and a half of March when our classes resume online still. But other aside from that, I had a few really good coffee chats and phone calls last week, a few especially good ones. And then as well because my spring break travel plans were canceled because of the virus. I am able to go next week to a freshman sophomore diversity day that Jeffries is having if they still have it, because I know a lot of the banks have been canceling their various programs because of the virus, so we'll see if that still happens and hopefully it stays on and I'm able to go, all right, Grace, what episode is this? What? Session seven?
Grace: [00:02:46] I think so.
Patrick (CEO of WSO): [00:02:48] It's been a while. Yeah, kind of. Craziness has unfolded. Last talked you out of the city already.
Grace: [00:02:56] Yes, I'm back at home right now.
Patrick (CEO of WSO): [00:02:58] You're in Maryland?
Grace: [00:02:59] Yes.
Patrick (CEO of WSO): [00:03:00] Yeah. Good. You got out because New York is really bad right now, right? Yeah. So, yeah, tell me a little bit about what's going on. Obviously, you're not able to work in your internship. I think the school year is probably going to be done right.
Grace: [00:03:15] Yeah, I'm online the rest of the school year now.
Patrick (CEO of WSO): [00:03:17] Have they already said that?
Grace: [00:03:18] Yeah.
Patrick (CEO of WSO): [00:03:19] Yeah. So here they canceled. I'm in California. They canceled school through May until May, but I think it's going to probably be just done for the year and then summer school, maybe for the kids. Hopefully they can go back because it's crazy here, right?
Grace: [00:03:35] Yeah.
Patrick (CEO of WSO): [00:03:38] But yeah, tell me a little bit about what's going on. Are you? I mean, obviously, it was probably really hectic the last few weeks as things kind of ramped up and got scarier. Did you do you know, like you're going to get out right away?
Grace: [00:03:49] Yeah. So my school was pretty proactive in getting everyone out. So I was I wasn't really allowed to. I live on campus, so I wasn't really allowed to stay in on campus housing. So I've been home for about two weeks. I went back one day last week to get some of my stuff from my room. But other than that, I've been home doing online classes, so. And then with my internship, there's yeah, it's definitely weird. I haven't left my house in like six days.
Patrick (CEO of WSO): [00:04:17] Is there any sort of lockdown or stay in shelter in place in Maryland yet?
Grace: [00:04:22] Kind of. I mean, everything's closed, so really only go to the grocery store.
Patrick (CEO of WSO): [00:04:28] This is nuts. This is nuts. Yeah, I can tell you, I've never seen anything like this. Two thousand eight was very different in the sense that it was kind of more of a gradual kind of screeching halt rather than like a sudden, you know, two, three week, just everything stops, which is kind of unprecedented. But hopefully, you know, as we go get through April, the numbers start slowing down a little bit.
Grace: [00:04:57] Yeah, exactly. And with my internship too, there's not a whole lot I can do remotely, unfortunately. So I mean, they'll send me a few things every once in a while, but not much so.
Patrick (CEO of WSO): [00:05:11] Luckily, you have time on your side, so you're OK. I mean, I feel bad for my mentee John, right? He's graduating into this. Mm hmm. And he doesn't have anything lined up yet. I mean, you have some interviews still lined up, but he's in a really tough spot. I'm just like telling him, like, if you can get anything, just take anything right now with like a salary, you know, because I think it's going to be a pretty deep recession, if not depression, right? Especially if it drags through. Like if we can't even have partial openings in April, it's going to be bad.
Grace: [00:05:48] Yeah, I'm glad it's I guess this is the best year for me, for it to happen as a freshman.
Patrick (CEO of WSO): [00:05:53] So, yeah, so we'll see what happens. I think hopefully the health care systems can handle the surge that's coming in the next week or two. I think it's going to be the worst this week and this week I thought would be really bad. And then next week, hopefully it's going to be really bad next week. Some people are saying end of April, but I think there was enough stuff put in place, at least here in California. And I think New York, where people started taking it seriously, like halfway through March, that I am hopeful early April, we start seeing some of the impact from that. Yeah, exactly. But anyways, how is everything else going? Are you still doing networking? Like, are you trying to like, still do our routine calls or what's the.
Grace: [00:06:37] Yeah, I mean, it's slow down a little bit. But right now, at least since I've been home, I've mostly just like I've. I had like five phone calls this week. Still, a lot of them were people. If they referred me directly to someone else, I haven't really been reaching out to some people cold like the last couple of weeks just because, yeah, I know it's been since. It's an unprecedented situation, but
Patrick (CEO of WSO): [00:06:59] It's kind of awkward to be reaching up like, Hey, can we chat about your career when they're like, scrambling, like, try to figure. So I think, yeah, some just common sense around. If you do, if and when you do start kind of starting that up again in April, just being sensitive to those right things and even just making, you know, understand if you're too busy, maybe a summer, maybe in the summer we can chat kind of thing. And the people tend to be more open to that. But like, Oh yeah, yeah, we'll talk. And then and when you do reach out and follow up, they'll be more apt to actually get on the phone with you. Although, some people may be open to chatting because they're stuck at home and they're bored and they like that. They're like, give you a human interaction, like outside of my family, my immediate family,
Grace: [00:07:43] Who I've talked to this week, have said their schedules more flexible now, so it's easier for them to do that kind of thing now. Yeah.
Patrick (CEO of WSO): [00:07:49] So yeah, it might be good for you to continue just building those relationships and stuff. Do you ever do video chats with people or is it always just phone?
Grace: [00:07:57] You know, always just phone calls? Yeah, it's
Patrick (CEO of WSO): [00:08:00] It's too bad. Like, I feel like face to face is so much better, like just to get to people, right? But. So what else is going on, so I think obviously everything's online, you're just going to finish your courses, do some sort of online exams.
Grace: [00:08:15] Yeah, I'm on exams. Yeah, basically out of the spring, exploratory days at the banks are now all online, too. So like the RBC, one that I was going to go to is online. And then there was one for Macquarie that was just cancelled. And then Credit Suisse is now all online too. So less opportunity to like, actually meet people in person, unfortunately.
Patrick (CEO of WSO): [00:08:41] Yeah, it's unfortunate, but you've also done a lot more legwork than a lot of freshmen. So you're going to be a better sports. It's all relative. The question is how protracted this downturn becomes. If it's like really bad, if it's like ends up being a deep recession for a couple of years, hopefully by the time you're kind of junior coming senior year, we're headed back out of it. I mean, there is there is an outside case and optimistic case where things start gradually opening up by the end of April, early May and then ramped by the summer. And things kind of get back to normal. I just don't think there's going to be some long standing impact on the economy because some businesses are not going to survive. So, yeah, just depends. You know, it depends on the curve. Basically, we really don't have that much control over it and trying to get ahead of it, so just play it by ear. In terms of just other stuff, I think obviously keep your grades up. And then this summer, the plan was to be doing an internship, right?
Grace: [00:09:44] Yeah. And hopefully we'll be able to be back in the city. I mean, I guess it depends on how things play out, but I want to give it back up there as soon as I can.
Patrick (CEO of WSO): [00:09:53] Yeah, I mean, my guess is they probably won't let you back. My guess is they probably won't do office like in office until like May or June. But even if you could go in June, July and just do two months, that's still really worth it. Right? But right now, yeah, I'm hopefully June, July, August. You can get some great exposure in that internship. But anything else, how are the calls going? Tell me about those.
Grace: [00:10:22] Are they been really good? So I talked to I mean, recently, it's been mostly alarm, but and especially younger alumni. So they've been really helpful with kind of referring me to other people to talk to and then offering to help me out with getting an internship next summer at the banks that do offer sophomore spots. So that's been good and it's been promising.
Patrick (CEO of WSO): [00:10:46] Yeah, that's competitive, right? The sophomore slots,
Grace: [00:10:49] Yeah, because not all banks do it, to begin with and then the banks that do have a very limited number
Patrick (CEO of WSO): [00:10:54] Of positions.
Grace: [00:10:56] Yeah, but it's been good, especially at some banks now. I think I was talking to someone from Barclays yesterday and they said they've built up actually like a really good position recruiting wise and they get a guaranteed number of Super Day spots for Fordham students there. And so they're almost on the same level as like a Yale or Harvard in terms of the recognition, the Fordham students get recruiting their
Patrick (CEO of WSO): [00:11:20] Awesome and that's for just Barclays, the Ivy IBD general bucket general pool. That's awesome. Yeah, so that's good. I mean, if you can make do you know, I think there is some threads on Wall Street Oasis about sophomore programs. I don't know if you've seen them. Let me see if I can lay it out for you. Have you seen any of those or have you?
Grace: [00:11:41] I've seen some of them. Yes, I guess a lot of them open the end of this summer into applications. Open-end of the summer, into the fall.
Patrick (CEO of WSO): [00:11:51] Ok, let's see here. Have you seen this list? Forty three diversity of recruiting programs at Amazon banks? The most exhaustive list. Have you seen where they're at?
Grace: [00:12:00] I don't think so. I have. I have an Excel sheet that some upperclassmen at Fordham have made, and that has at least 20 some.
Patrick (CEO of WSO): [00:12:10] Check this out because there may be some programs you could some other programs. I just sent you a link to that. For people listening, it's forty three diversity recruiting programs at investment banks, the most exhaustive list. So if you are underrepresented. Can find it the under-represented category, whether female or minority. Ok, you can. There's lots of diversity programs here that you can. Look at this like look at Blackstone Group Future Women Leaders program.
Grace: [00:12:43] Yeah.
Patrick (CEO of WSO): [00:12:44] Have you seen this?
Grace: [00:12:46] I've seen a lot of them. And then there's a few of them that I know of then been discontinued in the past year or two as they focus just on sophomores and some of the freshman ones. They don't do anymore.
Patrick (CEO of WSO): [00:13:00] Interesting. Yes, so there's that. Then the other thing I wanted to point to was the sophomore internship thread. That one was a good one. Some are analysts recruiting. The advice to get a bulge bracket summer internship does the sophomore summer matter? Yes. Sophomore tentative advice here you go. Take a look at these discussions right here to see if you. You probably already know about most of these. It's probably similar, but just in case you find one, you might find a new one. And obviously a lot of these. This is going to be for next year, but going into your sophomore year, you want to kind of have these on your radar, right?
Grace: [00:13:56] I started making an excel sheet with all the deadlines, at least the deadlines from this year. So I know when things are coming up perfect.
Patrick (CEO of WSO): [00:14:07] So, yeah, I think basically. I mean, you're in as good a shape as you can be. Obviously, hopefully this summer you do get that experience. If not, you may want to spend some time just continuing financial modeling, training that type of stuff so you can at least put on more the hours. I don't remember if we put that in your on your resume, like number of hours, you've trained with it. I haven't. So like once you do like, I think you should do that regardless whether you have the internship or not mm in person, I think you should do a lot more financial modeling training and put the number of hours you specifically have invested there so that you can just get super efficient and fast and excel like there's no reason why you can't come into your junior internship and be like a financial modeling wizard and PowerPoint wizard, or you're not touching your mouse and everyone's like, Whoa, whoa, who is this girl? Because it's you'd be shocked at like how an actual banker if they see somebody that's young doing thing correctly, how it would like really impress them. Versus somebody like the normal sophomore or freshman is likely using their mouse or they're used to a Mac, right?
Grace: [00:15:22] Yeah. Even just a few months at my internship so far, I've already learned so much with especially PowerPoint.
Patrick (CEO of WSO): [00:15:29] That's awesome. Yeah, PowerPoint is a big one. And then excel just being superficial. Excel is super helpful to for financial modeling and whatnot as you build up like your financial statement, modeling skills, your M&A modeling skills, valuation specifically. And a lot of it's just like for banking specifically, it's a lot about how you present stuff. So like the quick keys and formatting, how to quickly format cells and like align, align things and stuff, it sounds silly, but that's a huge percent of your percentage of your job. So if you can be like just 20 percent more efficient instead of working like eighty five hours a week, you're working more like sixty five seventy.
Grace: [00:16:07] Mm hmm. Right.
Patrick (CEO of WSO): [00:16:09] They can or they just you're so good that they load you up with more deals and you get better deal experience. But then you get a good bonus and have a lot of opportunities coming out of bank. So how can I help in this kind of time of uncertainty?
Grace: [00:16:29] I'm not sure. I mean, I think like I know last time we talked, you'd said just to be kind of even if it's only 15 or 30 minutes a week, just kind of going over like technicals. And basically,
Patrick (CEO of WSO): [00:16:40] Oh, we talked about doing a mock interview. Mm hmm.
Grace: [00:16:43] So I, especially on Wall Street, always this guy, even just the basic section. I've just been kind of going over that periodically
Patrick (CEO of WSO): [00:16:53] Try to keep things on, on the technicals, on the technicals. Do you want to do a short mock interview right now? Would that be helpful?
Grace: [00:17:00] I guess so.
Patrick (CEO of WSO): [00:17:02] You're like, you were ready for it. And then I didn't even bring it up. Like, I don't know if I want to do this.
Grace: [00:17:08] I don't know how ready I am, but that's OK.
Patrick (CEO of WSO): [00:17:11] I mean, that's why it's mock, right? I think it's helpful to do it in somewhat of a. Somewhat of a pressure situation, right, with the camera rolling because there are higher views, right? There are stuff like that. So maybe we can do more of a. Can you send me? Can you just pay me right now? Your latest resume because I can kind of use that. We can do a blend of technical and behavioral, if that's OK. Or do you want to just keep it technical?
Grace: [00:17:41] I'm fine with either. I guess a mix is probably good.
Patrick (CEO of WSO): [00:17:45] Ok, cool. Let me. I might have it right here. Grace. Let me see here. Yeah, here we go. Okay. I have one from January 31st, which I think is probably enough. Ok, so we'll just do like 10 minutes, OK, 10 15 minutes doesn't have to be long. So grace, thanks so much for joining us and coming in for an interview today.
Grace: [00:18:16] Thank you for having me.
Patrick (CEO of WSO): [00:18:18] Well, I think I lost you for a sec here. Yeah, there you go. Ok. Did you hit the volume by accident? No. Oh, you're good now. Ok, so grace. Thanks so much for coming in to join us.
Grace: [00:18:30] Yes. Thank you for having me.
Patrick (CEO of WSO): [00:18:32] So it'd be great if you could just give me a short walk through your resume. Just tell me a little bit about yourself.
Grace: [00:18:39] Mm hmm. Yeah. So I'm a freshman at Fordham, currently studying global business and finance, and I'm originally from Baltimore, Maryland. And so around the age of nine years old, I was diagnosed with a rare neuromuscular disease, and that led me to undergo several hospitalizations and surgeries over the course of several years. And so as this happened, I had the opportunity to become involved with the hospital on the Johns Hopkins Children's Advisory Council. And on that council, I've been able to advise on various hospital initiatives, both strategic and customer service related. And through those experiences, I've also been selected to represent the youth voice on various hospital panels to audiences of hospital leadership and different physicians. And so during this time in high school, these experiences really helped cultivate my communication skills and sense of confidence in presenting my ideas.
Patrick (CEO of WSO): [00:19:44] Did you ever think of going into medicine since you seem to be really into health care? And by the way, I may be a jerk just to push you a little bit. Don't get just try to keep your composure, but I'm just going to try to push you to the little areas and stuff like that. Just right? Are you? Go ahead.
Grace: [00:20:03] The medical aspect never interested me as the technical medical aspect, but the part that I really enjoyed was being able to collaborate with other people and providing input and thinking of solutions for various problems in the hospital. So the more strategic aspect is what I really enjoyed being able to give the council.
Patrick (CEO of WSO): [00:20:24] Ok, great. So why so what interested you in finance or investment banking
Grace: [00:20:31] Around the same time? When I was in high school, I read a book called The Ascent of Money, which is essentially it's written by a British economist, and it essentially gives a history of the world in terms of the first banks and stock markets, and insurance markets. And that's what first introduced me to a lot of the different parts of finance that are out there, and it made me want to look into more. What is a stock and how does it work? And so on my own, I began to look into what these different things were and the different careers related to that. And that's how I stumbled upon investment banking and finance in particular. So because I have no family in the industry and anywhere in finance, I began to reach out to people in my local area who work in different parts of finance. And in particular, I spoke with a principal at JMI Equity, a growth equity firm, and a senior investment banker at a local investment bank. And I got to hear from them about the work they do, and that really interested me in seeing the impact they've got to have on a wide range of businesses. So that's what really interested me in finance and investment banking in particular.
Patrick (CEO of WSO): [00:21:43] So what specifically about the job did you find most interesting, though?
Grace: [00:21:50] Well, for investment banking, I saw different all the different industries, types of companies that this one woman got to work with, and she saw some of those specific deals that she was telling me about. Each had different. Each had unique characteristics. So I guess how dynamic it was also what interested me?
Patrick (CEO of WSO): [00:22:13] What is she doing like M&A work? What type of deals was she doing?
Grace: [00:22:17] Mostly M&A
Patrick (CEO of WSO): [00:22:18] M&a? Do you know if it was sell-side or buy side sell side?
Grace: [00:22:22] Mostly.
Patrick (CEO of WSO): [00:22:22] Ok, great. So I think. I'd love to hear your opinion of what's going on with the stock market lately. Have you been following it?
Grace: [00:22:33] Yes. So I know the shortest bear market in history just ended. But there's also the possibility that because this situation is going to extend your stay for a while is probably a lot more volatility in store.
Patrick (CEO of WSO): [00:22:51] Yeah. Do you feel like now is a good time to be investing in equities?
Grace: [00:22:56] Well, I guess that depends on risk tolerance.
Patrick (CEO of WSO): [00:23:00] Would you if you had, say, $100000? What would you do right now with that money? How would you allocate it or how would you tell, like if you were an investor, how would you tell someone to allocate that money right now?
Grace: [00:23:11] Um, well, at least for someone in my position who's young and doesn't need money for retirement anytime soon. I would invest probably, especially in a lot of the technology companies and those that have the focus on being able to do things remotely and those who are developing those technologies and then also looking at some of the other areas that are very undervalued or have lower valuations right now due to the large dips.
Patrick (CEO of WSO): [00:23:40] Got anything else you'd be concerned about in terms of what you would look for to a type of company you'd look to invest in right now?
Grace: [00:23:47] Right now, I look at mainly larger ones, I know the smaller cap stocks in particular have been suffering quite a lot and their futures are more uncertain, especially with the pause in all the economic activity right now.
Patrick (CEO of WSO): [00:24:02] I'm just taking notes to mention later. In terms of OK, so that's great, and so in terms of you would invest in technology kind of what if like what if, like you thought, oh, Zoom is a great investment because all these work from home situations, but it's you missed the boat and it's up 80 percent. Would you still invest in it?
Grace: [00:24:28] Well, I'd have to do further research, I guess on that, on how I believe the current market price reflects its valuation. But I guess with Adjust, based on what I do know right now, I would be cautious of that because once the situation, once everything returns to somewhat normal, perhaps Zoom will not be used to the extent it is right now. So they could see their subscriptions fall again.
Patrick (CEO of WSO): [00:24:57] Ok, great. So let's talk a little bit more about. I guess just a little bit more some technical questions, can you talk, can you talk to me about just the different valuation methodologies that you've been exposed to in your internships or what you know about the different valuation methodologies?
Grace: [00:25:14] Mm-hmm. So there's comparable transactions and that's looking at, especially in the same industry as whatever company you're looking at and seeing the multiples that have been paid for other the market valuations for comparable companies and determining a multiple based on that value the company at. And then there's precedent transactions, which looks at past transactions in the industry among comparable companies and seeing what multiples have been paid in those acquisitions. And then there's DCF to calculate based on company's cash flow.
Patrick (CEO of WSO): [00:25:54] Sorry, the first thing you said was called transactions comparable or compare trading comparables. Yes, or transactions. You said sorry, the second ones you said transactions, cyclone precedent.
Grace: [00:26:07] And then the first one was comparable companies, comparable companies.
Patrick (CEO of WSO): [00:26:10] So what are you looking at their comparables?
Grace: [00:26:13] Companies in similar industries with similar customer profiles and capital structures.
Patrick (CEO of WSO): [00:26:20] So private companies, they're
Grace: [00:26:23] Usually public,
Patrick (CEO of WSO): [00:26:25] Ok? And so can you walk me through like how you specifically do that? So like, give me an example of a public trading comp and do you have an example of something? Did you ever do that analysis? Have you ever done a valuation?
Grace: [00:26:39] I have not, but an example would be looking at, say, McDonald's. And then for comparable companies looking at other fast food companies like your Burger King or Wendy's and kind of comparing those and then and their market valuations and then also making adjustments for any differences in capital structure or growth profile companies.
Patrick (CEO of WSO): [00:27:03] So you taught me about. Are you comfortable? Walk me through. Like when you say, look at when you say, look at other fast food companies, are you comfortable walking me through like what you would look at specifically and what types of analyses you'd be doing to try and get to a valuation of McDonald's?
Grace: [00:27:19] So you really focused on some of the key ratios like PE ratio and then the debt ratio?
Patrick (CEO of WSO): [00:27:28] Yeah, OK. And so what would you do with those with that group?
Grace: [00:27:33] Will you could you would have the different multiples and look at those among the various companies and you'd have to account for the differences in those companies and the one that you're looking at the company whose valuation you're trying to determine and using those and accounting for those differences to arrive at a multiple range for the company's valuation.
Patrick (CEO of WSO): [00:27:55] Ok. And what about other valuation? So you said there's the trading comparables, there's the precedent transactions or acquisitions. Do you know what a control premium is? Ok, so we can go through that you'll you can review it in the course, but what about a discounted cash flow analysis? You want me to walk you through that? Yeah, that'd be great. You've lost your audio again a little bit. Let me say. Oh. Oh, they talk again.
Grace: [00:28:30] You hear me now.
Patrick (CEO of WSO): [00:28:31] You're kind of cutting in and out. I don't know if it's your speaker. Do you have a plug in headset, buddy? Yeah. Ok, cool. I'm. All right, so, yeah, you got your audio back, so let's talk about decaf.
Grace: [00:28:44] Ok, so this is determining valuation just based on the single company's financials. So first, you want to start looking at their cash flows and projecting out their free cash flow. And to do that, you look at earnings before interest, after taxes,
Patrick (CEO of WSO): [00:29:00] Before you even get into that. Can you tell me what is the whole point of discounted cash flow? What's the theory behind it?
Grace: [00:29:05] Ok. So this isn't as market based as doing comparable companies or precedente transactions valuation method. It's looking just at the one single company, and it's using their financial, their free cash flow and projecting that out to determine a valuation. So you look for
Patrick (CEO of WSO): [00:29:24] What are you doing after you project the free cash flow? What are you doing
Grace: [00:29:27] To try and discounting that back to the present value?
Patrick (CEO of WSO): [00:29:30] Perfect. Ok. So yeah, so when you go ahead and walk me through how you get to those free cash flows, that's pretty.
Grace: [00:29:35] So for free cash flow, you start with earnings before interest, after taxes and then you add back in depreciation and amortization since those are non-cash expenses and then you subtract out capital expenditures, as well as the change in net working capital to arrive at free cash flow value. And you have those you project that out, usually for a five year period. And then you also need a terminal value to account for the cash flows in the years beyond the projection period. And you can do that. There's two different methods for doing that. You can use the perpetual growth method, or you can just use a terminal exit multiple. And when you and then you calculate the weighted average cost of capital, which is the blended required rate of return based on the company's capital structure. Accounting for both the equity and the debt portion.
Patrick (CEO of WSO): [00:30:28] So if a company, let's say there's two exactly equal companies, would you expect a company with higher debt to have a lower or higher weighted average cost capital
Grace: [00:30:38] That would have a higher weighted cost of capital, usually because they're higher debt amount?
Patrick (CEO of WSO): [00:30:45] It's actually the reverse. Ok? Because typically equity is more expensive required, right? There's a higher debt than typically. I mean, yeah, so like in terms of capital structure, if everything else is equal between two companies, the one with higher debt blended, the blended weighted average cost cap capital for that, for example, will be lower. Assuming they're not paying a crazy, high interest rate on debt because they're levered or something. So in terms of. Ok, so yeah, you understand DCF pretty well. Talk to me a little bit about, let me see what I can ask you. That's kind of very common. You talk, you talk me through evaluation. You talked me through like why investment banking? I'm not going to ask you specifically like, why this company? Because I assume you've already spoken with people here. And so you. Kind of have that idea looking through. Some of these do you. Are you comfortable doing like how what like a ten dollar increase in depreciation expense, how it would flow through the free statement? You think so? Your financial statements? All right. That's a tough one.
Grace: [00:32:03] Do you say an increase in depreciation or decrease?
Patrick (CEO of WSO): [00:32:05] An increase
Grace: [00:32:06] An increase? Ok. So an increase in depreciation is going to cause a decrease in net income, but that's not by the total amount because it's a tax deductible expense. So that decrease in net income, then on the cash flow statement on cash flow from operations, it's going to decrease that cash flow from operations. But then you have to add back in because depreciation is a non-cash expense and cash flow from operations.
Patrick (CEO of WSO): [00:32:39] So let's say it's ten dollars, let's say it's a ten dollar increase in depreciation expense, OK?
Grace: [00:32:43] So if assuming a tax rate of effective tax rate of 40 percent, then an increase in depreciation of ten dollars is going to cause a decrease in net income by six dollars. That's one minus the tax rate. And then on the
Patrick (CEO of WSO): [00:33:02] More dollars paid to taxes on that. Yes. Ok. Yes.
Grace: [00:33:07] So then in cash flow from operations, that's going to have a decrease in cash flow from operations of six dollars. But then because the depreciation is a non-cash expense, you have to add that back in cash flow from operations. But then on and then on the balance sheet in property, plant and equipment that increase in depreciation is going to cause a decrease in the value of those assets. But then on the other side of that decrease in taxes being paid is going to cause an increase in cash. And that also shows up on the cash flow statement.
Patrick (CEO of WSO): [00:33:48] Great. How about the balance sheet?
Grace: [00:33:50] Or on the balance sheet. It's going to be an increase in cash, but then a decrease in EPMD.
Patrick (CEO of WSO): [00:33:57] Yeah. Yeah. How much does penny decrease
Grace: [00:34:02] By the $10?
Patrick (CEO of WSO): [00:34:05] By $10 by 10? Exactly. And then overall assets fall by four? Right. Because you have cash going up by four. I'm sorry. Overall assets fall by six. Cash goes up by four. Penny drops by 10.
Grace: [00:34:16] Mm hmm. Yeah. And then that also affects retained earnings or shareholder's equity retained earnings
Patrick (CEO of WSO): [00:34:21] That'll drop by drop by six. Cool. Pretty good. Now, the question is, if we threw a lot of harder numbers out there and reversed the order, how quickly you could get through that. But that's a good one to practice just going through financial statements because it's a very common question. Tell me a little bit about. What do I like here? So if I was. If let's say I'm in this in this crisis, this recession, right going on right now with COVID and I'm an investor and. I'm invested, I have, let's say I have. I have a decision of where I want to invest in the capital structure, and I know that there is a company that's was before everything hit, you know, everything went down. It was a $200 million company, let's say. But I know after all that all that's going on, the value of that company is going to get slashed in half. It's going to go to one hundred million. And we know that there's a good amount of debt on this company, their senior debt. There's. There's basically know senior debt with bank loans that has actually has actual assets backing it, they're subordinated or high yield debt and then there's preferred stock and common stock. Where would you think about how would you think about where you would want to be on that capital stack given knowing that things were headed south?
Grace: [00:36:05] Mm. Well, with interest rates being so low right now, that's definitely that impacts the debt portion a lot. And then with equity values being very depreciated right now, perhaps that would be a better opportunity to a better place for more with more opportunity for profits.
Patrick (CEO of WSO): [00:36:25] Yeah. So like assuming the interest were already set, so they already issued the bonds, issued the term loans. So it's not them going out to raise new debt. It's like that debts on the balance sheet. So let's pretend, let's say it's one hundred and twenty one hundred and twenty million dollars of debt, of which 80 million in senior secured and 40 is subordinated debt like high yield bonds. Mm hmm. Where would you want to be if the market went from a two hundred million dollar value for the whole company to one hundred million dollars? And that's a tradition
Grace: [00:37:00] Where we're saying equity or debt or
Patrick (CEO of WSO): [00:37:03] Equity debt or where if debt, where and the debt
Grace: [00:37:07] Probably on the debt side, if I invested at the higher valuation just because the equity value is so far low, but with the senior debt, at least in
Patrick (CEO of WSO): [00:37:18] This case, the equity is completely wiped out.
Grace: [00:37:20] Yet if the equity is wiped out, then I'd want to be in the senior debt because that's backed by assets. And if with the uncertainty in the economic picture, the high yield debt is a lot more risky.
Patrick (CEO of WSO): [00:37:34] Well, based on what I'm saying, what around where do you think the high yield bonds would be trading? Oh, OK. Where do you think what do you think they'd be worth around ballpark? Because I said it goes from the value the company went from two hundred to one hundred. We have about 80 million of senior secured debt and about 40 of high yield bonds around. Where do you think?
Grace: [00:37:55] That be around 20 now,
Patrick (CEO of WSO): [00:37:57] Because I think it will be around there's $40 million. And I'm saying there's about $20 million of actual value in the company left. So I would say around 50 cents on the dollar. Oh yeah. So about half. So it's like 40. There are 40 million issued of high yield debt, 80 million. And then this is very rough numbers. It doesn't necessarily have to trade around. But if it was known that, hey, the if you were to liquidate this company and, you know, do whatever or the value of these companies now only 100 million, the high yield bonds would be trading at distressed levels. Mm hmm. Kind of what you're seeing right now. Right now, a lot of these companies that. Have a lot of high yield debt on their balance sheets. They're starting to trade at trade, at a discount or to issue new debt, there's a huge, huge spread now between right, the senior secured loans and high yield people are. The investors are now requiring a very big premium in order to invest in high yield. So tell me a little bit about if we can cut it there, I think that was good, so let's go back through it a little bit. I think your answers on. Um. Like, walk me through, I think it was good, it was a little health care heavy around like medicine because of your personal story about going through there. So I try to get to your finance kind of earlier. Okay. Because like. Their most people aren't going to like my snarky comment of like, well, why not just go into medicine, then you don't want them to even like partially think of that because like your super sharp, you seem really like gung how about it. I think get faster to the like I was initially doing this like maybe hit one point of how that introduced you to stuff and how that influenced you, but then quickly jump to how you were introduced to finance and how that excited you. Why investment banking with your answers rather than being so more broad stroke around like, you know, I spoke with her and it was, you know, growth equity firm and this I would really tailor depending on who you're talking to, you're talking to growth equity for even more specific about the growth equity person and what specifically about her looking at these types of deals and how she was helping them grow and investing in this, be very specific. If it's if you're talking to investment banker, don't talk to me about growth equity right now that interested you tell me about the banker, the woman you were mentioning and the deal she was doing. And be more specific in your explanation of how she's doing. Sell side M&A. Just getting more comfortable using that lingo. So they're like, Wow, she gets it. So then I can. Then then I can ask you more detailed follow ups such as like, OK, well, tell me about a deal that she did and what was interesting about that. And you know, how did she how she OK, walk me through an M&A process, then what is a sell side M&A process look like? And then I might go down that path? Okay. So if you can get comfortable with those and just give a little bit more detail to kind of show off a little bit more that you know what they're doing with the right lingo? You're going to sound more knowledgeable instead of just saying no, they worked hard. And it was or it seemed like interesting work because they were helping these companies. Some of the language you're using was very broad, and it didn't give me a sense that you knew really the day-to-day and that what it was. So that was like little things. It wasn't your answers weren't bad by any means. And like the way you held, you were composed was really good. The thing I was going to ask you about when we were talking about, like I talked a lot about recession, a lot about what are you looking at the stock market, all this stuff. You gave some great comments about looking at technology stocks that aren't as impacted, like the work from home stuff that was good. The one thing I was kind of you were talking about, like you said, bigger companies, I would look at Comdex. All the smaller companies are kind of getting hurt. I think you want to be a little more nuanced and talking about the balance sheet, OK? I think you want to talk about like safety. So like the types of investments that would be really good right now are like consumer staples, stuff that isn't going to go down in a recession, like a Costco, a Wal-Mart or a Kraft Heinz Kellogg. These things that are it tends to be more stable. Dividend paying stocks should, in a recession, fare better than an airline stock like right now or travel or a casino stock or a, you know what I mean? So just have a little bit more perspective and nuance around there and be more opinionated about it and then talk about the balance sheet, be like, I, you know, to invest right now. I'd be a lot more cautious, and I'd want to make sure that the balance sheet is strong and could withstand lower cash flows pretty significantly. So I don't want to be investing in companies that are very highly levered and industries are going to be potentially shut down or partially shut down for an extended period. Mm hmm. Okay. I think being really knowledgeable on this stuff and reading more about like that, obviously you can say, obviously there's a lot more upside if I'm investing in the airlines because they've been so hammered or like oil with the supply shocks. So that's another thing I could ask you about. Like, tell me what's going on with oil right now and like you could talk about, it's a double whammy shock right now. It's a supply shock because the Saudis are in a price war with Russia, and they're just putting out a twenty five dollars a barrel oil, which is incredibly low. And most of the producers aren't profitable until you hit around 40, 50, 60 dollars a barrel. Mm hmm. So it's a supply shock because they're literally just ramping up supply of super cheap oil. And so, so and it's a demand shock in the sense that we're headed into recession with the virus, everything being shut down. So less people are traveling, less people are doing all this stuff. So the demand for oil is going down. So it's like a double whammy literally hitting on both sides. And so you can say that's why the oil companies, the exons of the world, the Chevron's, the ETF XLI is just getting completely obliterated. Mm hmm. So you can say that that could be something that you allocate a small amount to because you feel like it's been oversold. However, like you said, it's super volatile, but you're young and you feel like over the long run you don't see oil at twenty five dollars or 30 dollars a barrel indefinitely, or you say something along the lines of air lines and whatnot. I feel like there's very much going to be a bailout. They're not going to let the airlines fail. So I'm going to invest in the airlines that have the strongest balance sheets like the Delta and not the United and Americans in the world. Or, you know, so it helps to have some opinions about this stuff and potentially like even show that you're interested in investing, even if you only have like five hundred dollars to invest whatever it is like, just showing a little bit of that because I can guarantee some of the bankers will be interested because they're like looking at deals and willing to hear your opinion on it.
Grace: [00:44:56] Does that make sense? Yeah. And I guess if I was interviewing for a specific coverage group too, then that would totally industry group.
Patrick (CEO of WSO): [00:45:04] That would. So, yeah, the only thing is like, you kind of mentioned it when you were saying, like, I'd go for the big companies, but I think we were trying to say is like you were trying to say, like the less volatile things and the ones some of the big companies, some massive companies are in huge trouble. Look at Boeing. Mm hmm. Right. So like, I don't know. I mean, they're now probably going get a bailout. But a week ago, that was a very, very touchy situation. You know, Trump's kind of saying they're going to he's kind of been pushing them to get that, but they're in really bad shape because they were already in bad shape before this whole mess happened. So just try to be more specific and more financially oriented in your answers, if that makes sense. Ok. Like just show. So like, oh, so perfect example. So then we started talking about valuation methodologies. Be careful because initially you said.
Grace: [00:45:53] Trading, hey, I think I tripped up on my words there, the
Patrick (CEO of WSO): [00:45:58] Words you tripped up, you were talking about trading comparables and you said, you know, blah, but you said, you know, you look at the companies that are similar. But when you're talking about trading comparables, it's really about the public companies in the stock market shaking what they're trading at right in the public markets. So I asked, is that private? I kind of try to trick you. I said, Is that private market? You said, no, it's usually public, which is good. So, so. But talk specifically about the types of multiples you look at. So in some places, we would look at a revenue enterprise, value to revenue, enterprise value to EBITDA, enterprise value, blah, and talk about those multiples.
Grace: [00:46:35] Mm hmm. Ok.
Patrick (CEO of WSO): [00:46:36] And maybe even have some examples. So you talked about the acquisitions, precedent, transactions or acquisitions? That's good. Learn what a control premium is. It's typically the additional amount they have to pay over and above what it would be valued at to take full ownership of the company. So there's typically a premium paid over and above what the business is worth to gain full control of it.
Grace: [00:47:02] That's usually why president transactions yields the highest. Right?
Patrick (CEO of WSO): [00:47:06] Exactly, exactly. So like a strategic and strategic buyer that buys XYZ Company, that's like their direct competitor. There's additional value in synergies in taking ownership of that competitor over and above what the pure maybe cash flows are showing you from that company? Ok. Because maybe then they get more pricing power. Maybe they can consolidate all their XNA expense into one kind of central office. Maybe Company A that's buying Company B has a better marketing engine that they can immediately attach to market Company B's product portfolio and then boom explode sales. So there's a lot of things. That you can kind of mention in terms of that. And then, yes, so just talk more about, yeah, just the ratios. Be very specific. And ideally, you can do an example like talk about an example like you talked about McDonald's. That's awesome. But then if you have that as your example, McDonald's, who are the comps for McDonald's, I'm going to like, push you right? So it's telling you like, you know, I don't even know who Starbucks or a. What is it called the Kentucky Fried Chicken that I don't even know? Yeah, there's a couple out there, right, that other big fast food chains that are publicly traded like a Chipotle or something and talk about even talk about maybe like where the multiples are trading for each of those, the p e ratios versus the EBITDA versus the. Ok. I think it'd be good. Good to have that in your back pocket because as an example, I think it really shows that you it's not just the theoretical thing you actually have, like, thought about it in the specific industry.
Grace: [00:48:46] Mm hmm. That makes sense.
Patrick (CEO of WSO): [00:48:49] Um, anything surprise you on that? I asked you. Not really. Not really. It's OK down the middle. Ok. So yeah, I mean, that was a pretty much down the middle interview. I was a little bit snarky at the beginning with your saying, Well, why finance, not medicine, but like, don't let stuff like that if somebody is really like in a bad mood or they're being aggressive for whatever reason or are they being snarky, just be positive and upbeat like you were right and just continue because it happens a lot. Sometimes they do it on purpose. Sometimes there's two people in a room and you'll have a good cop in a bad cop, and one person will be a complete jerk to you, and the other person will be like nodding and really receptive. And they want to see you just completely ignore the person that's like being a jerk. Or are you trying to still pull them in and engage them? Mm hmm. So it's a lot of like mental games on top of all the other stuff you have to worry about. But yeah, I think overall, it's great, I think a little more a little more sitting on the technical evaluations, getting a little bit more versed with the lingo. I think we'll do you a lot of good. Okay. And then maybe we should do it again because I think like I can. It gives me a really good sense of where you are. And I think we could get you to a point where you're just like. A machine for interviewing. And then I start actually asking you really tough stuff like that's the goal you don't if you're fumbling through like you weren't fumbling through, but if you're not like really nailing the basic stuff, they're probably going to just be like, OK. And they'll kind of cut you some slack. But if you like, nail the tough stuff and then you're able to get like the intermediate and some of the advanced, they're going to walk out, be like, we want to hire her. Mm hmm. You know what I mean? And that's what you want. You want. You want to impress them with your knowledge. And so I think and you know. We'll make sure you have access to, like all of the financial modeling stuff, so you can kind of dig in more there, I think you may have a lot more time this summer than you think or like the online classes than you think. Yeah. But you've been this is great. The other stuff I asked you a lot of questions around like kind of a tough question around where would you invest in the capital structure? It's a little bit more of my research, my restructuring roots where like in a distressed situation, where do you want to be? And you can just think about like, where would you want to be? Where it's safest, right? Or senior secured is the safest. Now, if I gave you, I gave you a scenario where the value was cut in half from two hundred million to one hundred million. So like debt that's under that hundred billion dollar thing is pretty safe, especially if it's secured. But if it's a high yield and it's like one hundred and twenty million, it was going up to one hundred and twenty. So the stack was like, here's one hundred million a senior that's safe. Sorry, here's 80 million senior the value of the companies here. But the problem is there's high yield like here. So these two fingers are below are gone. Mm. Right. So each of these figures is $10 million. These two are gone. So you only have like this whole, this whole thing is at risk. And the equities completely wiped out all the equities. So it's like zero, so if you had said common stock and preferred stock, that's a big right because that's not where you want to be. Downturn. And. So, yeah, any other questions or other ways that can be helpful, I thought. I thought overall is really good. I thought just a little, little tiny tweaks and just showing off a little bit more.
Grace: [00:52:20] Ok.
Patrick (CEO of WSO): [00:52:21] Yeah. In terms of like just showing your knowledge at that DCF, you were really, really strong. Mm hmm. But keep practicing with it. Right? Ok. Yeah, because I could have asked you, like, OK, so you were really strong in the DCF, but then when I asked you a weighted average cost of capital to exact companies with the higher amount of debt, remember debt is the cheaper, right? That's the cheaper cost to capital. So if there's more debt, other things being equal in terms of a ratio of the whole capital structure, it tends to have a lower whack for the same company, other things being equal. Ok. Yeah, I think that's it. Ok. Anything else I can? Yeah, no. And I think you've already started kind of going through taking a little bit of time to start training. I would keep doing that like again, just half hour, hour a week. You'll start getting really good. But could you do videos? Of yourself answering, like, I don't know, have your mom or somebody just ask you, like you just print out the guy. It'd be like, Ask me anything from here. Mm hmm. To the point you can give, you can give like similar sample answers. There, I think if you can get to that point where you're answering 80 90 percent of them by the start of your sophomore year, like by through the summer. Eighty nine or something, you're really like nailing them. You're going to be in awesome shape for sophomore year and stuff. Mm hmm. And you have time. You have a lot of time. So that's the. Anything else I can help with on the interview prep stuff?
Grace: [00:53:58] I don't think so, at least not right now, since I don't have anything imminent coming up. So.
Patrick (CEO of WSO): [00:54:04] Yeah, did you have you taken a lot of finance courses at Fordham yet?
Grace: [00:54:08] You go in the fall. I'll be doing a lot, though.
Patrick (CEO of WSO): [00:54:13] Ok. Did they just not let there a lot of like liberal arts stuff you had to take?
Grace: [00:54:17] Yeah. So I mean, I've had a few business-related classes so far, but it'll get a lot heavier this fall.
Patrick (CEO of WSO): [00:54:24] It's all going to connect, actually studying. This is going to make those courses easier. I think it's all going to start like the web in your head, all the neurons and the neural pathways are going to start connecting. You'll be like, What is this and what's that? And it's all you're going to learn the corporate finance together and cap and model, and it's all going to come together and you're like, Oh, OK, now I'm really getting it. It's going to really help you.
Grace: [00:54:45] Yeah, I'll be taking an actual accounting class this fall.
Patrick (CEO of WSO): [00:54:48] So it's nice. Yeah, I could have asked you a lot of questions about changing networking capital specifically. I have two companies, one growing faster, the other ones growing, and they have, you know, heavy. Her networking capital requirements, which one would you invest in or which ones has? What's the profile of the cash flows for two, one growing company that's going really fast and growing slower? He's working capital, ties up a lot of cash, right? Right. I might ask you to explain that.
Grace: [00:55:20] I like the source of cash
Patrick (CEO of WSO): [00:55:22] Cash use of yes, a source of cash. But like I ask you to actually explain why it's a source of cash or why it's a use of cash. So just thinking conceptually, not just OK, I know that's a source of cash. When I add, I have to add it back on the cash flow statement to get all the numbers to work and my balance sheet to balance. But actually understanding why is that? So like when a company, so let's just explain so accounts, let's take accounts receivable as an example, a company that's growing super, super, super fast. There are their accounts receivable is going to be going up. Right? So that accounts receivable means they haven't been paid yet. So if their accounts receivable are going up, they're owed more and more and more money, which means overall their cash is lower and lower and lower. Mm hmm. Does that make sense? So like it, basically, it basically means that they're owed more and more and more money. So even though they're making more their cash flow, if, if, if there are get stretched, if the days get stretched, they could actually be in a cash crunch even though they're exploding in growth. Okay, that makes sense. So like something, that's why you see these companies, sometimes they grow into like death because they just have such they're growing so fast. They need capital, capital injection, capital injection, capital injection. So these VC funds, they'll go back companies that are like super cash flow negative because they see the like, well, now is the time to grow. And the reason it's so cash flow negative is because it's working. There's a high working capital requirement for it. Maybe it needs a lot of inventory. Maybe it needs a lot of maybe are just growing so fast. So like, for example, inventory is a great one. Dell Computer notoriously has very low inventory because they only hold kind of what they need as like once you order your computer like it's called just in time inventory and they'll order just those parts and bring them in and build your computer and send it out. But like a company, like a beverage company that has to pre-manufacture these bottles and hold them and then ship them. If it's growing really fast, it has to pre-order or like, let's say you're making a widget, you have to pre-order all this stuff. If your company is growing like this, you have to. You have to keep buying more inventory, more inventory, more inventory to well in advance months, sometimes six months in advance of when you're actually going to sell that. So you have to put so much money upfront and you have to keep putting it more and more to hit those higher and higher sales. So it's a huge cash trade, and that's what it means when they say heavy net working capital requirement. The working capital is the capital needed for this company to work, the capital needed to keep continue. This company is just massive. So other things being equal, you'd actually rather invest in a company that has a low working capital requirements because it's going to be spinning off cash a lot faster and easier, even in times where it's growing fast.
Grace: [00:58:15] Is that like an airline where they have a lot of deferred revenue? It's like they're getting the cash up front and
Patrick (CEO of WSO): [00:58:20] Then, oh, deferred revenue is massively capital intense, right where they have they had the leases. They have to sign these leases up front or if they own the planes, that's like huge, huge, huge expense, right? They are. I mean, they're collecting. The good part is they're collecting before actually servicing the tickets and flying people. They're typically collecting that revenue the months in advance. But it's so it's such a capital intensive industry. It's why there's so many bankruptcies in the airlines. Historically, there's a reason, there's a reason. It's a really tough business. Price of oil, if it spikes and goes way out the roof, like, let's say I said, it's 30, 40 dollars a barrel, it's up at one hundred and twenty. All of a sudden, it's super expensive to fly people everywhere. Right? And so that that that's more like the just the basic risk factors of airlines and commodity businesses that depend on commodities in commodity prices, which can fluctuate wildly. But I think. Understanding the net change in working capital, when you're talking through your DCF and just thinking on you add back 1982, where can you have it all like being able to understand the nuances behind, Okay, well, what goes into that change in network working capital and understanding like air days, AP accounts payable, accounts payable days. So what are ways I could make my change in that working capital decrease? Thinking through that, how could I actually get more aggressive on collections so air goes down, stretch out my payable, so my vendors that are selling me the stuff I need to do would be like, Oh, we'll pay you in 10 days. No, just kidding. We'll pay you 30. We'll pay in 60. Actually, our terms are not 90. Sorry, we're going to pay you 90 days. Do you know how much that helps you in terms of retaining cash in the business? A lot. So like getting really aggressive, pay us . Pay us to your customers faster. If it is a delay to get paid and then stretching out your payables. So you want your days payable as long as possible. You want your air days to be as short as possible and you want your inventory requirements, your capex to or your inventory to be as low as possible. So can we change to a just-in-time inventory? Can we actually make it so we don't need to order seven months in advance or six months in advance? Can we order just a month in advance and still stay and have our inventory turns to increase? So instead of us turning our inventory two times a year when we're having to order six months in advance, six months in advance, and are only turning over our inventory twice a year, can we order one month in advance and turn it 12 times a year so that you have much smaller capital requirements or working capital required for that inventory? Okay, so that retains a lot more cash in the business because you're not making these huge purchases and then having to sell into it and another huge personal purchase, it's like you're turning the inventory much faster, so you're only holding at any given time a much smaller percentage of your cost of goods sold. That makes sense. That makes sense. Yes. So like really understanding those tweaks, because if they get into it, they can, they can push you on that. And if you show that you have that knowledge and that'll come with also doing some of the financial modeling stuff and playing around with, Oh, what happens when I change inventory turns? What happens when I, you know, when I increase inventory turns? Oh, cool. Look, cash goes up like I'm retaining more cash in the business. But what happens when I stretch air days or if I bring in air days or I stretch AP very accounts payable. So knowing all that stuff, I think is really, really like just those little nuances and being able to explain them well can make you a stronger interviewer. Okay?
Grace: [01:01:54] This is really helpful, thank you.
Patrick (CEO of WSO): [01:01:55] Yeah, yeah, it's cool.
Grace: [01:01:57] Like actual mock interview, I've done.
Patrick (CEO of WSO): [01:01:59] So it's the first one you've done first.
Grace: [01:02:02] Like mock interview.
Patrick (CEO of WSO): [01:02:03] Yeah, so I mean, no, it's super helpful. I think a lot of this I'm just talking to you about like other things you can focus on. Yeah, and you'll see some of this stuff on in the in you see almost all of this stuff in the investment making interview. Of course we have. But. You have to really make sure you're stepping away and you're not. Like, if you don't really understand what each line means, stepping away, be like, well, what does that actually mean in the context of an actual business? And always try to like, bring it back to an example, be like, Well, what would happen is say, I'm a widget maker, just like I make, I make these pens. Right. So, OK, what's my who are my suppliers? Who are my, who are my clients, office stores and companies who are my? Who are my vendors? Oh, I have to buy this rubber piece, I need to buy whatever it is, the ink in here. Oh, there's ink is a commodity and it's been shooting up in price. It's killing me. Or, you know, these pens are very special. It has the fine felt tip or whatever, and it's hard to get. So I have to buy out my lead time on the inventory for this is five months. It's killing us. Oh, I found a new supplier. They can get it to us in two months instead of six. That's huge for us so we can turn our inventory a lot faster so we don't have to order so much at once. So that's good stuff. Ok, I know I've repeated it like a hundred times, I just think it's good to hear it one hundred times.
Grace: [01:03:31] Yeah, oh no repetition.
Patrick (CEO of WSO): [01:03:33] Yeah, repetition is like something. Yeah. So I think just keep going through the course. I think for the networking do is continue. Are you doing like a certain set amount each day? I know you still have online classes and it's been kind of a hectic time, but do you have a set like schedule that you're following?
Grace: [01:03:53] Not exactly. I just it kind of ebbs and flows just based on responses. And like I said, I haven't really been doing like cold reach outs at all of the past couples of weeks. It's more just been people I've had phone calls with, and then they've referred me to someone else.
Patrick (CEO of WSO): [01:04:08] So yes, you haven't been doing like the LinkedIn stuff lately.
Grace: [01:04:14] Not the past couple of weeks. Not since all this started.
Patrick (CEO of WSO): [01:04:17] Yeah, I think that's fine. I think maybe mid-April, you can kind of start up again, assuming things are kind of starting to go back to right. But if it's, you know, I would still in your outreach, say something along like, hope, hope you're staying safe. Just figured you might have some time now that you know, things are gradually getting back to normal. I'd love to just chat for ten minutes to hear more about BMO or whatever, whatever the firm is. I think just continuing to do that and build those relationships, that's going to be the most important thing. I think you have the time to kind of get the technical skills down to get the interview skills down. I think we should keep doing this because I think it's going to be very helpful to you when you get in that interview room. So you've heard and I can do different types, you know what I mean? I could we didn't even do behavioral. Right? And so a lot of times it's behavioral. It's not oftentimes so, so technical.
Grace: [01:05:15] And that's what a lot of people I've talked to recently have told me, especially at certain firms, that it's really just the behaviors that matter.
Patrick (CEO of WSO): [01:05:21] Yeah, they want to know, like, are you a hard worker? Can you figure it out? Because like, even if you? Don't know, like every little intricacy of, you know, capital structures and weird debt tranches and preferred shares, convertibles and all this weird stuff, if you don't know all that stuff, that's stuff you can learn. It's like it's more about your attitude. And are you willing to work hard? Hmm. So anyway, anything else that can be helpful before we call it? I don't think so. Ok, so let's try to do this again next month. Remind me, let's do another mock interview,
Grace: [01:05:53] Ok,
Patrick (CEO of WSO): [01:05:54] Because I think it was good. I think it kind of gave me a good sense of where you are at, where you're at, and I think you can. Gradually, just keep getting more specific, more refined in your answers and feel free to just record yourself even. Do you have a brother? Do you have a brother or sister? Yeah, younger, older, younger brother. Perfect. Just be like, Hey, take this awesome. My sister used to force me to do. My older sister forced me to do whatever she wanted. So you probably. So you can get him to hopefully ask you some questions and just put your phone there and just record yourself while you're doing it, OK? And you'll find some stuff you'll be like, Oh man, I could answer that better. Or then you'll look at the course like the sample answers. You're like, Oh, OK, let me do that again. Mm hmm. Ok. Through that practice, you'll get so much better.
Grace: [01:06:42] Mm hmm. Yeah, literally.
Patrick (CEO of WSO): [01:06:44] Like literally ten times better. You will. You're your 20th interview versus your fifth is just like night and day. Mm. So ideally, you're doing that 20th interview by yourself. Right? You know, not in the real deal. Yeah, but cool. Ok, let me know if I can be helpful. We can do this again. And then in April, hopefully by the time we're talking next month, I'm really hopeful that like people are talking about, like testing has been ramped and we're talking about like the curve coming down and we're talking about things opening back up.
Grace: [01:07:18] Right?
Patrick (CEO of WSO): [01:07:18] If not, it's going to be a scary summer.
Grace: [01:07:21] Yeah, really. Hope I can get back in the office soon.
Patrick (CEO of WSO): [01:07:24] I think you will. It may not be. It may not be May. But I think for sure by June, I'm hopeful. Mm hmm. And that's OK. I mean, as long as you have, if you have something on the resume, I think it's OK and people are going to be really understanding with everything that's happened.
Grace: [01:07:37] So yeah, I guess my university too is letting us do pass fail for any classes we want this semester. Oh, wow. So that's nice.
Patrick (CEO of WSO): [01:07:47] Yeah. Are there any that you're going to do pass fail? I would. I would do if you're going to get an AA anyways, don't do pass fail.
Grace: [01:07:54] All right. But there's a few where I probably wouldn't so
Patrick (CEO of WSO): [01:07:57] Be awful there. Like you were headed towards the B philosopher B
Grace: [01:08:00] Minus
Patrick (CEO of WSO): [01:08:01] Even minus.
Grace: [01:08:04] Well, it's like a three six. It's a three nine right now. So you keep that up there.
Patrick (CEO of WSO): [01:08:10] You want to keep it up. Yeah, just. Yeah, I mean, I definitely avoid the big pluses and the BS. Mm hmm. Which sounds so funny, but there's so much great inflation. But yeah, avoid that. It's like, Oh my gosh, ship, you'll be OK. But yeah, no. For your GPA to keep it up in the high 3s is good. But yeah, if you're going to get an A-minus, if you're if you think you can maybe get an a and something, you might have an A-minus, you can get it to be an A. Then keep it because it's going to make it harder. Then if you get an A-minus later to drop it so much because right, that as much. Mm hmm. But that makes sense.
Grace: [01:08:47] Yeah, that makes sense.
Patrick (CEO of WSO): [01:08:49] So like if you get half A's and half a minuses, you're really heading for three eight is perfect. That's true. It's great. So. And plus it builds some buffer in versus if you only have like five classes graded and then you get like, how like a b like later on you, it's like drags it.
Grace: [01:09:05] That's true. Yeah.
Patrick (CEO of WSO): [01:09:07] So cool. Ok, well, let me know if I can be helpful in between now and near end of April. Otherwise, yeah, keep trying to spend that half hour half hour each week with not just reviewing the course, but try to maybe do a half hour study and then half hour for somebody to interview you for half hour. Okay. And record it. And then just for yourself. And then I'm from there. Yeah, hopefully next month we'll do it again and we'll see incremental improvements each time. Yes, sounds good. All right, Grace. Thanks so much. Thank you. Bye. Soon. Bye. And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis dot com. And till next time.
or Want to Sign up with your social account?