<p>This is strange to ask, especially from a high school student, but I take an accounting elective (college credit and honor's GPA, why not?) and we were talking about investment banks. But what is that investment bankers do?
Do you guys sit around and do 'math' as many aspiring Asian financiers put it in my school? Do you just make phone calls and get clients? Read through financial statements/charts and predict trends? Become dignified office-boy slaves?
On a bigger note, what exactly are investment banks? I was told IB's are basically financial advisors whom you give your money to, and they invest it for you.
If someone could give a clear, detailed response, I'd really appreciate it!</p>
<p><a href=“http://talk.collegeconfidential.com/investment-banking/1127702-video-intro-investment-banking-all-you-kids-out-there.html[/url]”>http://talk.collegeconfidential.com/investment-banking/1127702-video-intro-investment-banking-all-you-kids-out-there.html</a></p>
<p>[What</a> Do Investment Bankers Do? | Mergers & Inquisitions](<a href=“http://www.mergersandinquisitions.com/what-bankers-do/]What”>What Do Investment Bankers Do? A Non-Boring Answer)</p>
<p>‘sit around and do math’ lol
rather sit around and and create/edit spreadsheets</p>
<p>Here is an example of what investment bankers do:</p>
<ol>
<li><p>Small company with interesting brands or technology needs capital to expand (spend on additional people, marketing, infrastructure).</p></li>
<li><p>Investment banker spends days doing “due diligence” on the company, interviewing management, examining products, analyzing markets: essentially building a case for value in the company.</p></li>
<li><p>Investment banker prepares forecasted income statements, balance sheets, and cash flows for the company based upon realistic assessment of company prospects drawn from due diligence and market analysis (essentially, are the company’s products or proposed products marketable at prices that provide a net profit to the company?)</p></li>
<li><p>Investment banker then determines, based on his/her judgement of quality of company management, credibility of projections, competitiveness of market impacting achievability of projections, what the risk of gain or loss of an investment in the company might be (remember, the company was seeking new investment in order to pursue its market opportunities).</p></li>
<li><p>“Risk” is a judgement call made by the investment banker, and is usually incorporated into a percentage figure known as the “discount rate.” </p></li>
<li><p>The discount rate is applied to the forecasted net income of the company and yields what is known as a “present value” for those forecasts. The present value of the forecasts represents the value of the business (a business is only “worth” to an investor what it can produce in the future in terms of future profits)</p></li>
<li><p>The amount the company seeks for investment is then divided by the present value of the company and the resulting percent indicates the amount of ownership of the company that the company will have to give up to an investor for the investment amount being sought. The company may or may not want to give up the percentage ownership as derived by the calculations and analysis made by the investment banker. But, there it is.</p></li>
<li><p>The investment banker then is charged with going out and actually raising the investment amount on behalf of the company.</p></li>
</ol>
<p>So: essentially what an investment banker does (at least in this particular incarnation, of which there are many) is to determine the value of an “investment” and then go find the money.</p>
<p>The links and the post above mine are good. Basically, depending on the office one’s in, Ibankers’ jobs include but aren’t limited to: Helping companies raise funds (underwriting IPOs, help in selling bonds, etc.) and advising companies on mergers (or acquisitions). Other jobs involve proprietary trading, which is basically trading with the firm’s own assets.</p>
<p>models and bottles</p>
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<p>When IBers help companies raise funds with bonds and whatnot, are you advising others on what to buy (if so, who?), or is Goldman Sachs itself buying bonds and stocks and whatnot?</p>
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<p>“Help companies raise funds” = what is know within investment banking as “corporate finance.”</p>
<p>" . . . itself buying bonds and stocks" = what is known within investment banking as “sales and trading,” where Goldman buys stocks and bonds with its own money and hopes to make a profit by selling them to someone else at a better price.</p>
<p>So how is a company involved with sales & trading if an investment bank is buying and selling stock with it’s own money?</p>
<p>Institutions, Hedge Funds, Banks, Corproations, etc all need to buy and sell securities for a variety of purposes, including hedging. They come to S&T desks and ask for two-way prices, ie in FX Options, a custy may come to me and ask me GBPUSD 1w ATM in 80mio GBP, I quote 8.5/9.5 (% vol), and the custy decides to give me (I.e. sell at 8.5), pay me (I.e. buy at 9.5) or pass my rate (maybe he got a better bid or ask from another bank). </p>
<p>S&T desks at banks are market makers, providing liquidity.</p>
<p>Can someone major in finance and still do S&T or do you need a quantitative degree?</p>
<p>No, you don’t need a quantitative degree, there are plenty of traders with finance/other majors.</p>
<p>What does it take to be a successful ibanker?</p>