How Does Corporate Finance Differ From Investment Banking

Corporate Finance and Investment Banking, both form very essential divisions of any firm, dealing in the field of Finance. According to Investopedia, the most basic difference between these two is, that Corporate Finance deals with the management of a company’s finances, whereas Investment Banking deals with the financial growth of the company. Regardless of their differences, it has been seen that these two fields make for great, promising careers for finance aspirants. A professional working in either of these fields, has to deal with similar kind of challenges and prospects. Corporate Finance, is like a blanket term, used to refer to all things finance, including every vertical that deals with financial activities. In a very broad sense, Investment Banking can also be called a type of corporate finance, which makes their differentiation slightly difficult. While corporate finance can be used more like a general term, Investment Banking is a more of a niche concept.

Have you been on #LinkedIn, looking for some good insights on the #Finance industry, yet stumped on where to it is? https://t.co/Z9dr5MuxJL— Imarticus Learning (@imarticus) October 29, 2016

The field of corporate finance, is concerned with all the day-to-day financial activities of a firm. The main objectives herein are, to take decisions regarding investments, raising capital, maximizing the value of the company, distributing the resources throughout, issuing of securities, analyzing and identifying areas, where it would be necessary to raise capital. Investment Banking, by and large deals with the process of making a firm grow. This is done mainly through, the process of mergers and acquisitions, issuing of securities and various other functions, through which the capital can be raised. Investment Bankers are the professionals, who carry out these activities for a firm and are hired for their specialized knowledge and approach. Investment Bankers are known for their abilities to steer a company out of financial turmoil on to calm waters, this why in spite of being a sub-field, Investment Banking is still considered to be a separate field.

The education requirement for Corporate Finance is a background in either economics, business, or any other finance related field. A degree in accounting makes for a lot in this field due to the nature of the job. As this field covers a lot of job profiles, the skills required here are, good analytical abilities, thorough knowledge about corporate theory, financial analysis, strong communications skills and familiarity with other related concepts of finance. Investment Banking requires a more specific set of skills, but a base in finance, investments and other areas is expected. A lot of Investment Bankers complete their MBA degrees and a few other certification courses, which gives them expert knowledge about the field of Investments. Lately a lot of companies have begun looking for candidates with exceptional resumes, which is the reason for the increasing number of people doing certification courses.

There are eminent institutes like, Imarticus Learning, which offer certification programs specializing in both of these field. Their courses are available both in the classroom as well as online format and can be done by professionals who already have a job. While both of these fields are equally challenging and rewarding, Investment Banking has become a front-runner choice for a career in finance; while on the other hand, Corporate Finance offers a variety in terms of career roles. Differences apart, both the fields have great perks and opportunities to offer.

Make Career in Finance with non-finance Background

 If you are looking for a job in finance they say that it’s mandatory to have a finance degree, but if you really want to work in this field and you don’t have any relevant degree then what do you do?  Still there is a hope.

Every organization wants motivated, dedicated and smart employees to do their work. Finance degrees train students on skills such as financial modeling and data analysis, but may not do much to provide other skills required for success in almost any job, such as communication, problem-solving and time management.

Below are some of the ways to show potential employers that you possess the skills that they desire in an employee, as well as the passion necessary for a successful career in finance. We’ll rate each of these by degree of difficulty to achieve (for example, signing up for a financial course is easier than obtaining an internship) as well as the positive impact it may have on getting you closer to your objective of embarking on a financial career.

1.       Learn Jargon:
If you are looking to make career in finance, then you must have knowledge about Wall Street lingo, difference between dilution and dividend, or between NPV and DCF. Learn some financial terms and
concepts. If you are a non-finance graduate and if you don’t know about financial terms and concepts it will become very difficult to get pass in preliminary interview stages. Interviewers want knowledgeable applicant for finance position, irrespective of his/her educational background.

2. Round off Your Education

Even though you are a non-finance graduate, you can match your level by taking relevant finance courses as per your education level. If you are an undergraduate then courses in economics, accounting or financial analysis will be a great options. And for a graduate students can prefer MBA in finance or CFA/financial modeling program

3. Enroll in Best Financial Courses

There are lots of finance institutes who provide Intensive courses which will help you to boost your skills which are essential for career in finance, such as advanced excel techniques and financial modeling. This are short term courses, as they typically conducted over a few days. But due to these short span programs’, you may need to be familiar with basic financial concepts to derive the maximum benefit from them.

4. Improve Your Knowledge Base

It’s not necessary that you will get full-fledged knowledge from your college degree. You can get plenty of information from local library or online. You might get some paid resources from course providers. Being self-taught in a difficult field like finance demonstrates a number of desirable attributes to an employer such as initiative, passion and drive.

5. Link up with a Mentor

Linking up with a mentor is another way of boosting a financial career. A mentor can be anyone who can influence, who thinks highly of your capabilities and is willing to help you achieve your goals. A mentors can be your favorite professor at college, a family friend or relation with a successful career in finance or someone you know in a professional capacity, such as a supervisor during a previous internship. Don’t hesitate to approach a contact who you think could help you in your job search.

6. Score a Meaningful Internship

Scoring a summer internship still remains one of the best ways to lock in a prestigious full-time job in finance, as many Wall Street firms pick their new hires from the ranks of their summer interns. At the best business schools, an estimated one-third to half of MBA students work for their summer employer after graduation.

But since obtaining a paid internship in finance is likely to be very difficult for a non-financial graduate, one must consider other options such as an unpaid internship or volunteer work with a broker. The opportunity cost that arises from doing such unpaid internships or volunteer work may be offset in due course by the higher earning potential of a finance career.

7. Do Your Best to Get Your Foot in the Door

Grab opportunities! Expand your job search to other locations, and use your network to check for job openings in a financial organization. Try to get an entry-level position with a financial company, even for a non-finance role, may open doors to other career paths in finance down the line.

But for the vast majority of non-finance degree holders, getting a job in finance is likely to pose a significant challenge. This is more so because thousands of positions were reduced by banks and financial institutions in the effect of the 2008 global recession. However, using a combination of the tips discussed above should enable a non-financial graduate to substantially improve his or her chances of launching a career in finance.

So to become part of one of the fastest growing sectors in India, join Imarticus learning, we offer various finance and investment banking courses across many cities in India.

How to Prepare To become a Financial Model

Financial Models are are used to correctly assess a firm’s current state, as well as devise a future state in multiple scenarios. Financial modelling is a skillset that any serious Finance student must have and used extensively when you work for Investment Banks, Analytical/Research Firms, KPO’s, Credit rating organizations, Hedge Funds, PE’s, Venture Capitalists and even Startups!

 Here is a quick 10 question basic quiz to test if you are pro or an amateur modeler!

 1)     To start with the basic, walk us through a sample cash flow statement

2)     What are the two ways that the terminal value of a firm can be calculated?

3)     Define the three ratios that help to analyse the liquidity of a company?

4)     How do you calculate the Debt service coverage ratio?

5)     In Excel, which is more useful LOOKUP or VLOOKUP? When should each be used? And what are the pitfalls of each?

6)     What is the difference between NPV and XNPV? When would you use either? What are the limitations of the two?

7)     What is sensitivity analysis? How do you run a sensitivity analysis on a company?

8)     How do you model a leverage buy out? How is it different from a typical M&A deal?

9)     All things equal, what happens when a firm with a lower P/E ratio acquires a firm with a higher P/E ratio? Will the deal be accretive or dilutive? How does it impact EPS?

10)You do not have time to run an extensive financial model. How do you value a firm in 2 minutes?

 If you were able to answer 8/10 questions (without cheating), you are a pro!!! Model away – your financial models will make us proud!

 If you are able to answer 7 and less, no worries. It looks like you need a refresher!

Disruptive Innovations in Financial Services

Disruptive innovation in Financial Services is having the greatest impact where the delivery is happening through business models which are platform based, light on capital & data & analytics intensive .This is making the industry very innovation focused and competitive as it gears up to provide its customers with upgraded, digitally intensive solutions across business lines such as banking, payments, cards, investment management and many more.

A few central themes emerge in this area and are summarized as follows:

Infrastructural Streamlining

Advanced emerging platforms and decentralized technologies have changed the way information is aggregated & analyzed, improving connectivity and accessibility while reducing the cost & time for accessing information and providing financial solutions across geographies.

Automation

Firms are increasingly relying on and leveraging advanced algorithms and computing power to automate manual activities ,allowing them to offer cheaper, swifter & scalable products and services to clients.

Role of Intermediaries

Latest innovations are changing or eliminating the role of traditional institutions as intermediaries, and offering lower prices and / or higher returns to customers

The Strategic Role of Data

Financial institutions are accessing new data sets like social data, customer online behavior & likes , which is redefining ways in which they are  understanding customers and markets. It helps them to customize and offer bespoke offerings as per client requirement versus generic cookie cutter solutions.

Niche, Customized Products

With extensive availability of customer related data a lot of the financial institutions ,especially the new entrants are creating highly targeted products and services with deep & complex specializations, hence increasing competition and creating pressure for the traditional end-to-end financial services model to unbundle

Customer Empowerment

In this flat world with high end technology & emerging innovations, customers now have access to previously restricted assets and services, more visibility into products and their features and benefits and hence a heightened ability to make intelligent,need based choices making them “prosumers”