Why Investment Banking? or Why Investment Banking Easy?
In this article, we can understand all about investment banking- why investment banking interview question, the importance of investment banking, what are your strengths in investment banking, and what makes a great investment banker.
Investment Bank is a finance company or bank division that provides services to the financial markets of the country. Or guide a multinational company to invest.
why investment banking division?
Suppose a company or a government organization needs money right now and there are investors on the other side who want to invest their money. Neither government organization nor large company Direct sells its shares or securities to the public. The government organization contacts the investment bank or the public investment bank. Investment Bank plays the role of mediator in such cases.
Government banks contact the Investment Bank. Investment Bank then buys all the securities of the government organization to sell its securities. And they sell securities to all ordinary citizens on behalf of the government. Investment Bank charges a commission for this.
When buying securities from the government, the investment bank also checks the demand for securities among the common people. These are Investment Banks e.g. Morgan Stanley, J.P., Morgan Chase, Goldman Sachs, IDBI Capitals in India, J.M. Financial Institutions, securities, MAPE Capital advisors, etc.
Difference between an investment bank and a commercial bank.
|Commercial bank||Investment bank|
|1) Service –
To manage a / c of personal or business. Deposit acceptance, loan, and other functions.
|1) Sales, Trading, Finance Advisory Research, Brokerage Service. Do not accept deposits.|
|2) Key role –
Fulfills the credit demand of the country. At the same time, the contribution of this bank is significant for the growth of the country’s economy.
|2) Investment Bank works as a financial institution. Which provides services in the financial markets of the country.|
|3) Regulation –
R.B.I. Has control.
|3) Investment Bank is controlled by the securities and exchange commission.|
|4) Target Market –
The target market of a commercial bank is very wide. This includes individuals, organizations, traders, and people earning all kinds of income.
|4) Investment Bank’s target market is very small. High net worth individuals, large corporate houses, and government.|
|5) Means of income –
The means of income of a commercial bank are the fees charged for the interest or services provided on the loan.
|5) Investment Bank charges commission through this trading.|
How does Investment Bank work?
The functioning of the Investment Bank is divided into two parts. sell-side and buy-side
Sell-side = In this, Investment Bank guides the customer in large transactions.
An IPO is an initial public offering, a process in which a private company is transformed into a public offering. E.g. Recently, zomato launched IPO. Investment Bank was acting as an intermediary in this.
Buy side = dealing with securities, managing clients’ money, and making decisions for their investment. etc. The goal of the buy-side is to achieve maximum returns.
investment bank services-
This service ensures that all the software and trading platforms are working properly. At the same time, it is checked whether the right securities are bought or sold and all the records are maintained.
Middle office service-
Capital flow is insured in this service. Risk management is done. And profit is calculated. In addition, the front office is supported for transactions.
front office service-
In this service financial module is created. It deals with all the work of trading and finance. Strategy tires and manages high net worth individual and company investments. Also included in this service is maintaining customer relations.
People who do all of the above are called investment bankers.
why investment banking interview question & why investment banking sample answer
- What is another term for investment banking division?
Ans: investment banking is also called corporate finance.
- What is working capital?
Ans: The working capital required for day-to-day transactions in a business is called working capital.
- how to calculate working capital?
Ans: working capital = Current Asset – Current Liability
- What is monetary policy?
Ans: The policy the government or central government controls the money in the economy is called monetary policy.
- what is money laundering?
ans: In short, to bring black money into the economy and make it white is money laundering. Many people make money illegally and this money is not seen in any of their transactions and the money that is not taxed is black. This process is called money laundering.
- What are your strengths in investment banking?
ans: confidence, Good communication skills, knowledge about financial terms, ability to make the right decisions, and maintaining customer relationships can be a strong investment banker.
- What is investment banking and its importance?
Ans: Investment Bank is a finance company or bank division that provides services to the financial markets of the country. Or guide a multinational company to invest.
The importance of investment banking is as follows-
- To guide large-scale industries in their investment.
- Maximize the return on investment.
- Making financial decisions for investors.
- To act as an intermediary in important transactions like mergers and acquisitions and to increase the financial capital of the investors.
- This important work is done by investment banks to provide services to the financial markets of the country.
- What makes a great Investment Banker?
Ans: Good communication skills, knowledge about financial terms (merge and acquisition, capital market, trading, and selling, etc.) Ability to make the right decisions.