What Technical Knowledge Should I Know Before My Graduate Scheme Starts?
Investment Bank Training Schemes are Intense
Upon joining an investment bank, you will be given a period of training. All will differ slightly but the one thing they have in common is that they are short and intense, designed to get you able to hit the ground running when you get to your desk.
For those graduates with a relevant degree (accounting or finance), this training will extend the knowledge they already have, and it will provide a good challenge.
For graduates who only have 1 or 2 relevant university modules, this training will be a stretch. And for those without a relevant background, it will be very intense education conducted at speed.
Key Learning Points
- Training is intense and is designed to rapidly develop your knowledge in accounting, modeling and valuation principles within a short space of time
- Individuals with a strong relevant background often do best
- If you can only do one thing in advance then understand accounting as it underpins so many jobs in finance
If You Can Only do One Thing in Advance of Training…
If you can only do one thing in advance of starting your graduate training scheme, I would say do accounting. This underpins every job in investment banking.
Being able to read a set of accounts means you can:
- Understand the history of a company
- Model the future of a company
- Assess its funding needs
- Assess its credit worthiness
- Value the company
- Decide if it would fit with another company in a merger
So, getting up to speed on accounting will pay dividends in the future, not just in your training.
It is a bit like learning to drive. If you have never seen a car before, or watched another person drive a car, then your first driving lesson is going to be a car crash (excuse the pun).
However, if you have a little experience, even sat behind the wheel of your parents’ car once or twice in an empty car park, then your first driving lesson will progress much quicker.
If You Can Do Two or More Things…
If you have a little more time for your own preparation, then add on modeling and valuation.
Modeling takes the accounting history of a company and forecasts it into the future in Excel. Learning the keyboard shortcuts in Excel will increase your productivity (meaning you will be quicker during your graduate training and able to understand more complex material rather than just the basics), and as you are creating a future set of accounts in Excel you will get additional exposure to accounting.
Valuation then takes those future profits and cash flows and says, “how much would I pay now to get hold of those profits?”. This will set you up perfectly to appraise a company’s ability to enter into an M&A transaction, an LBO or to appraise their funding needs and whether a bank can provide that funding.
There are many other complex items you could get into – accounting for banks, regulatory conditions in different countries, swap curves, etc., but you can learn that when at the bank. Being strong at the basics of accounting, modeling and valuation will give you a solid foundation on which you can do almost any financial job.
Where Can I Find Information on Accounting
There are many courses available, most aimed at budding accountants, but these teach you how to create a set of accounts. Instead, you want to be a user of accounts. Our course The Accountant focuses on exactly what you will need to know in investment banking.
If you want modeling and valuation as well, then The Investment Banker is ideal as it covers accounting, modeling, valuation, M&A, and LBO.
But to start off, just download a set of accounts from a company you like and are interested in. The easiest way to do this is to find their “investor relations” webpage e.g., Kellogg’s Investor Relations. Here you can download their accounts. Focus on the 3 primary accounts (income statement, balance sheet, and cash flow statement) to start with and gradually read more.
Attached here is Kellogg’s Annual Report for 2020. You can find their 3 primary accounts on pages 55, 57, and 59.
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