Here is an INDICATIVE list of what areas to look at while preparing for a finance role in your summer placements.
However, please note the following points first:
1) The topics below are relevant for those who have been introduced to finance properly only after starting their MBA.
2) For those with prior finance exposure or related background (Economics/Commerce degree, CFA, CA, etc.) it is necessary to be up-to-date with their own subject matter as well.
3) Questions that come up in an interview will usually require you to apply the concepts (often in relation to what’s happening in the economy) than merely explaining them. It is also possible that you face very few or no questions related to finance despite appearing for fin-focussed roles.
4) The areas below are part of “basic” finance/economics preparation. If appearing for a specialised role, you may choose to explore that particular area more. (You will soon get some guidance about how to tackle different clusters of companies as well – we are going into details step-by-step)
(based on what most campuses have covered within the first and second terms)
1) Financial Reporting – No need to delve deep into book-keeping/accounting part. But one must be comfortable with reading, understanding and basic analysis of three main financial statements – Balance Sheet, Profit & Loss Account, Cash Flow Statement. Be conversant with the terms/jargon used in these statements. Also focus on ratios/parameters used for analysis such as ROI, ROCE, Cash Conversion Cycle, Debt-Equity Ratio, Current Ratio, etc. (indicative list of terms). Needless to say it is not enough to merely know the formula – find out the when to use which parameters and what information do they convey once calculated.
2) Valuation-based – Some of the most commonly used concepts are Time Value of Money, Discounted Cash Flow and related tools like NPV or IRR. Going one step further, you can even look at Cost of Capital or WACC, Financial/Operating Leverage, Capital Structure or Capital Budgeting. Some campuses may have also touched upon economic value added, measuring risk, dividend policy etc. Try to prepare at least all those concepts which you have encountered in your courses so far.
3) Cost Accounting/ Cost Management – Concepts of fixed cost, variable cost, relevant cost, sunk cost, opportunity costs, marginal cost etc. One would come across these kinds of questions very rarely, but could be helpful if you are asked to do any problem-solving or get a case study in any of the group discussions.
4) Markets – None of the campuses would have had a course on specific elements of the financial markets yet, but it will be beneficial to know the common terms/jargon associated with them. Examples: indices, derivatives, forward contracts, futures, options, commodities, bonds, currencies. Basic understanding of the term in the context of financial market is sufficient.
1) Macroeconomic terms such as GDP, GNP, balance of payments, balance of trade, national debt, monetary policy, fiscal policy, etc.
2) Microeconomic concepts such as demand, supply, elasticity, types of competition, etc.
3) Impact of fluctuations in interest rates, inflation, exchange rates
I prefer NOT to give a list of topics here, because that would be rather limiting. Instead, let me just give some general direction:
1) Think global economy. What is the current situation of major economies of the world and where are they headed? How is India placed in the whole picture? Try to look at both - real economy and financial markets.
2)It is likely that you may be asked to link theoretical concepts to what’s happening currently.
3) It will be very useful to prepare a sector of your choice so that you may direct the conversation during the interview (If you have some prior work-experience, it would make sense to pick that sector). One would not be expected to know details, but a broad overview such as sector players, industry dynamics, current status, future prospects, etc. You can also try linking concepts learned in class to that sector.
Brownie points if you have developed your own view on a particular issue or economy – based on sound facts and reasoning of course.
It always helps if you know recent developments in the companies that you appear for.
And one last piece of “gyaan” - There is no limit to how much you should prepare so do as per your own comfort level – constant comparing with others will do more harm than benefit beyond a certain point.
(Have InsideIIM.com's News Burger of the Day to take care of the above points!)
- Miti Vaidya (with inputs from Sowmya Srinivasan and Meet Kachhy)
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Miti Vaidya is a TAS Manager working with the Corporate Finance team of Tata Power. She is a CA and a MBA from XLRI Jamshedpur.