Term
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Definition
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Term
| What is Net Profit Margin? |
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Definition
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| What is Operating Margin? |
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Definition
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Term
| What are liquidity ratios? |
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Definition
| Measures the firm's ability to satisfy its short-term obligations as they come due. Includes the current ratio, quick ratio, and the cash ratio. |
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Term
| What is the current ratio? |
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Definition
| Current Assets/Current Liabilities |
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Term
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Definition
| (Cash+Marketable Securities+Receiveables)/Current Liabilities |
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Term
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Definition
| (Cash+Marketable Securities)/Current Liabilities |
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Term
| What is a solvency ratio? |
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Definition
| Measures the firm's ability to satisfy its long-term obligations. Includes long-term-debt-to-equity, total debt-to-equity, debt ratio, and financial leverage ratios. |
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Term
| What is the long-term-debt-to-equity? |
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Definition
| Long-term debt/Total Equity |
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Term
| What is total debt-to-equity? |
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Definition
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Term
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Definition
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Term
| What is the financial leverage ratio? |
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Definition
| Total Assets/Total Equity |
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Term
| What is Operating Cash Flow? |
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Definition
Net Income - D&A + Changes in net working capital + Losses from sale - Gains from sale
The inflows and outflows resulting from transactions that affect a firm's net income |
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Term
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Definition
| A measure of cash taht is available for discretionary purposes. Cash that is available once the firm has covered its capital expenditures. |
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Term
| What is Free Cash Flow to the Firm (FCFF)? |
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Definition
The cash available to all investors, both equity owners and debt holders. Calculated as follows:
Cash flow from operations + [Interest X (1- tax rate)] - net capital expenditures |
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Term
| Other performance ratios: |
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Definition
Cash flow to revenue ratio: CFO/Net Revenue
measures the amount of operating cash flow generated for each dollar of revenue
Cash return on assets ratio: CFO/Average Total Assets
Measures the amount of operating cash flow attributed to all providers of capital
Cash Return on Equity Ratio: CFO/Average Total Equity
Measures the return of operating cash flow attributed to share holders
Cash to Income Ratio: CFO/Operating Income
Measure the ability to generate cash from firm operations |
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Term
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Definition
Debt Coverage Ratio: CFO/Total Debt
Measures financial risk and leverage
Interest Coverage Ratio: (CFO+Interest Paid+Taxes Paid)/Interest Paid
Measures the firm's ability to meet its interest obligations |
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Term
| When calculating cash flow from operations, are dividends, taxes, and interest included in the calculation? |
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Definition
| No. Taxes and interest are already accounted for when calculating net income. Dividends are subtracted in Cash Flows From Financing |
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Term
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Definition
| Working capital is Current Assets-Current Liabilities |
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Term
| What is working capital turnover? |
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Definition
Revenue/Average Working Capital
Some firms have very low working capital if outstanding payables equal or exceed inventory and receivables. If this is the case, working capital turnover will be very high |
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Term
| What is return on assets? |
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Definition
Net Income/ Average Total assets
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Term
| If you can only choose 1 financial statement, what would it be and why? |
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Definition
Cash flow statement. First off, cash is king in a business. If you have free cash flow, you are able to pay dividends, acquire other companies, buy back shares, and most importantly to this industry, repay debt.
In addition, if you have multiple years worth of cash flow statements, you can essentially create a balance sheet and income statement. |
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Term
| What are the four values of BMO? |
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Definition
| Integrity, Empathy, Diversity, Responsibility |
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Term
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Definition
| Human, Intuitive, One Bank |
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Term
| What is the outcome of BMO's values, brand, and actions? |
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Definition
| Leading engagement, loyalty and growth |
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Term
| Why are you interested in being a credit analyst? |
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Definition
| Equity research might be, to an outsider, a "sexier" role, but in the end, what makes the world go 'round? What drives business? Global credit markets are roughly 5 times the size of the U.S. stock market. In the end, credit drives business, and that makes me really interested in it. Over the summer I spent some time in private equity, which I enjoyed. I saw how much a loan can help out a business, a person, and idea. I think the credit industry is really able to have the same effect on busiensses. Also, I like it better than equities because there is, at least in equipment finance, a tangible, physical asset which is being financed. In equity markets its simply a piece of paper. Also, equity markets are focused on a 6 month time horizon, which I think is ridiculous. I like credit analysis because you are looking for a company that is going to be solid with strong free cash flow and quality management for years to come. That's the kind of analysis I enjoy. |
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Term
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Definition
Motivated and extremely hardworking person. Whether its in school, on the field, or at work, I will always do my best work. I've gotten 3 B+'s my entire college career. All three times I was really upset. I put my best effort into every one of these classes, so to be told my best was only a B+, I was upset. I'm not a B+ student, I'm also not a B+ friend, teammate, collegue, or employee.
Another thing I want to mention is that I'm a really competitive person, and I've found over the years that my harshest critic and my fiercest competitor is myself. Because of this, I don't accept anything less than my best, and I think this has driven my success thus far.
Finally, I am a team player. The previous strengths I mentioned, hard working, motivated, competitive, all combine into my pushing my team to succeed. An example of this actually just happened a few weeks ago. As you can see on my resume, I am part of a group right now that helps manage a humane society's portfolio. The night before our presentation was due, I got a text saying my team's numbers were wrong. I texted my teammate, who said he was going to stay in for the night. So it turned out I had to do the whole thing myself. I could've cut corners so I could go to bed early, but I ended up staying until 4:30 AM to do the project to the best of my ability |
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Term
| Why would you do well at this job? |
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Definition
Again, I'm a hard working individual that's driven to succeed. I think this has driven and will continue drive my success. As a result, with the proper training, I feel that I could excel in any capacity.
Specifically, I think I would do well at BMO at as a credit analyst because I have experience in financial analysis. The past year this is about all I've done. We took over a portfolio last May, and I cover consumer discretionary, where we had 13 holdings. I had to model and analyze every one of these, so I feel like I have a really good handling on financial analysis.
I am interested and actually passionate about credit analysis. |
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Term
| What are Porters Five Forces? |
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Definition
| Existing rivalries, threat of substitutes, threat of new entrants, bargaining power of suppliers, bargaining power of buyers. |
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