Bloomberg Bat test informational pack

ABOUT THE BAT

HOW TO PREPARE FOR THE BAT The BAT aids employers in identifying and screening students who wish to pursue a career in global financial services. A basic level of finance knowledge is required, however the bulk of what is being assessed is a person’s aptitude and skills to be successful in this industry.

The BAT consists of 11 sections divided into two categories: (1) Financial Knowledge and Aptitude (2) Career Skills and Aptitude In preparation for the Finance sections of the BAT, students should ensure that they have a good understanding of the global macroeconomic marketplace, including its current events, basic terminology, products and institutions. The test covers a very wide range of topics and represents a practitioner’s approach to finance (i.e. not textbook knowledge only). Therefore, candidates should prepare for the BAT as they would an interview and not focus on the details of financial theory. A successful test taker will understand the “big picture” of how all the parts fit together.

Following are descriptions of the different sections of the BAT and the concepts students can expect to see on the test.

FINANCE KNOWLEDGE AND APTITUDE Financial Statements This section assesses knowledge and understanding of the concepts and language of accounting as tools of communication, monitoring and resource allocation. Topics include standard techniques of analysis, including ratios, interrelation of financial statements and financial articulation.  A c c o u n t in g P r in c i p l e s a n d G u id e l i n e s o IFRS and US GAAP o Accrual vs. Cash o Revenue and Cost Recognition o Capitalized vs. Period Costs  Fi na nc ia l R epo rt ing o Balance Sheet  Individual line Items  Off Balance Sheet Information o Income Statement  Individual line Items  Operating vs. Non-operating  Industry-specific line Items

© 2011 Bloomberg Institute

o Cash Flow Statement  Individual line Items  Sources and Uses of Cash  In ter re l a t ion of Fi na nc ial St at em e n ts  “No rm a l i zi ng” In c o m e St at em e n t Fi na nc ia l s o Non-recurring items o Tax impact  F i n a n c ia l R a t io s o Liquidity o Leverage o Performance o Efficiency

Corporate Valuation BAT participants are expected to explain and understand the most commonly used corporate valuation methodologies – (i) comparable public companies analysis, (ii) precedent transactions and (iii) discounted cash flow analysis. Test takers are required to distinguish between equity and enterprise values, levered and unlevered cash flows, various valuation multiples and the different costs of capital.  Tim e Va l ue of Mo ney o Present Value and Future Value o Discount Rates and Interest Rates o Simple and Compounding Rates o Annuities and Perpetuities  To t a l En te r p r is e V a l u e ( TEV) o Components of TEV o TEV vs. Equity Value o Minority Interest o Net Debt – Subtracting Cash from Debt o Basic vs. Diluted Shares Outstanding  Co re Va l ua tio n Me tho dol ogi es o Comparable Public Companies (Relative Valuation)  Pros and Cons  Operating vs. Equity-based Multiples  Selecting a Comparable Universe  Consensus Estimates and Forward Multiples o Precedent Transactions (Relative Valuation)  Pros and Cons  Selecting Relevant Transactions  Control Premium  Consideration and Structure o Discounted Cash Flow (Intrinsic Valuation)  Dividend Discount Model  Free Cash Flow Model © 2011 Bloomberg Institute

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Calculating and Forecasting Free Cash Flow Terminal Value (Multiple vs. Perpetuity) Weighted Average Cost of Capital (WACC)  Cost of Debt  Cost of Preferred Stock  Cost of Equity via the Capital Asset Pricing Model (CAPM) Sensitivity Analysis

Investment Banking This section covers the basic principles of capital budgeting, capital structure optimization and the advisory and capital raising services of the Investment Banking Division (IBD) within an investment bank. Test takers should generally understand the debt and equity syndication processes, primary versus secondary markets, mergers & acquisitions, leveraged buyouts and financial restructuring.  Ca pi tal Bu dge ti ng o Net Present Value (NPV) o Internal Rate of Return (IRR) o Payback Period o Opportunity Cost  R a is i ng De b t Ca pi tal o Types of Debt Instruments and Markets o Types of Tenor (Maturity) o Different Structures of Debt o Credit Ratings o Debt Syndication  R a is i ng Equ it y Ca pi tal o Common vs. Preferred Stock o Primary vs. Secondary Markets o Types of Public Offerings o Types of Private Offerings o Underwriting Process o Corporate Governance  Cost of Ca pi tal o Risk vs. Return o Debt vs. Equity o Impact of Seniority, Tax-deduction and Dilution  In v e s t m e nt B a n k i n g o Roles and Responsibilities  Investment Banking Services  Groups and Deal Teams  Information Firewall or “Chinese Wall”  Types of Investment Banks (Bulge Bracket vs. Boutique vs. Middle Market)

© 2011 Bloomberg Institute

o Mergers & Acquisitions  League Tables  Types of M&A Transactions  Different Types of Buyers  Asset vs. Stock Purchases  Cash vs. Stock Deals  Accretion vs. Dilution  Synergies  Goodwill  Due Diligence o Corporate Restructurings  Recapitalizations  Stock Repurchases  Splits-offs, Spin-offs, Sale of a Subsidiary  Joint Ventures o Leveraged Buyouts  Benefits  Candidates  Capital Structures  Sources and Uses, Pro Forma Balance Sheet  IRR Analysis  LBO Valuation  Credit Statistics o Financial (Workout) Restructurings  Covenants  Debtor vs. Creditor  Reorganization vs. Liquidation  DIP Financing  Distressed Valuations

Economics This section of the BAT is designed to assess understanding of economics as the framework for analyzing capital markets transactions, business decisions, consumer decisions and government activity.

Microeconomic topics include:  Co n s u mer b e h a vio r  B usi ne s s pro du ct ion a n d pro fit  Mar ket s t r uc t u re and e qu i l i briu m  In te r n a tio n al t r a de

© 2011 Bloomberg Institute

Macroeconomic topics include:  Mon ey, ba nki ng a nd m on et ary po l ic y  Fis c al po l ic y, reg ul a t io n a nd t r a de po l i c y  G DP and i ts co mpon en ts  La bor ma rke ts  In te r n a tio n al b an k i n g syst em

Financial Markets This section of the BAT is designed to assess ability to analyze and apply concepts relating to the broad range of activities in the global financial markets. Topics covered in this section include:  Se c u ri ti es i ndu s t ry s t r uc t u re and fu n c t i o n  P r i m a ry a nd s e c o n d a ry ma rket a c t iv i tie s  Equ it ies m a r ke ts  Fix e d i nco me and m on ey ma rke ts  Fo re ign ex ch a n g e ma rke ts  Co mm odi ti es ma rke ts  Ri sk m a n age m e nt and de r i va tiv e s  Cu rre nt eve nts in g lob al b u s i ne s s and geo po l it ics

Investment Management This section of the BAT is designed to assess ability to analyze and apply concepts relating to the field of investment management. Topics covered in this section include:  P r i n c i pl e s of po rt f o lio m a n age m e nt, b o t h t h e ore tic a l a n d a ppl ie d  Ma na g e r c l a s s e s and c ha r a c t e ris tic s  In v e s t o r c l a s s e s and c ha r a c t e ris tic s  As s e t a l l o c a t io n dec is io n s  Fix e d i nco me po rt f o lio m a n age m e nt  Equ it y po rt f o lio m a n age m e nt  Al te rn at ive asse ts c l a s ses and po rt f o lio m a n age m e nt  P erfo rm a n c e m e a s u rem e n t

© 2011 Bloomberg Institute

CAREER SKILLS Analytical Reasoning This section of the BAT is designed to assess problem solving ability. Test takers are presented with a series of hypothetical situations or sets of conditions and asked to answer a series of questions that require them to solve problems using logic, deduction and creativity.

Math Skills This section of the BAT is designed to assess university-level math skills, with emphasis on finance-related math. Questions require the solution of math problems ranging from basic (e.g., fractions, decimals, ratios and proportions) to more advanced topics (e.g., linear equations, statistics and econometrics, algebra and calculus).

Modeling Skills This section of the BAT is its most experimental and is designed to assess jobrelated practical skills. The current version requires test takers to take on a specific role in an investment bank, to read and process a news headline, and then to decide whether the news is positive or negative for them in their assumed role. Competencies assessed include Processing Speed, Analytical Skills and Decision Making.

Situational and Ethical Judgment This section of the BAT is designed to assess job-relevant behaviors as well as decision making in workplace situations that involve ethical issues. Test takers are presented with a realistic workplace scenario and asked to select their most likely and least likely responses. Competencies and principles assessed include Delivery Focus and Initiative, Interpersonal Skills, Personal Integrity and Duty to Clients.

Verbal Skills This section of the BAT is designed to assess reading comprehension. Test takers are asked to read a series of brief financial news articles and to answer questions that assess their literal, critical and inferential comprehension of the information presented in the passage.

Š 2011 Bloomberg Institute