Professional Documents
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Vce Summmer Internship Program (Financial Modeling) - 1
Vce Summmer Internship Program (Financial Modeling) - 1
• What is Finance? How is Finance different from Accounting? What are important basic points that
should be learned to pursue a career in finance?
• What is project finance? How is project finance different from corporate finance? Why can’t we put
project finance under corporate finance? Define 20 terminologies related to project finance.
• What is non-recourse debt / loan? What is mezzanine finance, explain with an example.
• Explain in detail with reasons of what the sectors are or which type of projects are suitable for project
finance?
1. What is Finance? How is Finance different from Accounting? What are important basic points
that should be learned to pursue a career in finance?
• FINANCE
• Finance is a broad term that describes activities associated with banking, leverage or debt, credit,
capital markets, money, and investments. ... Finance also encompasses the oversight, creation, and
study of money, banking, credit, investments, assets, and liabilities that make up financial systems.
• Finance and accounting operate on different levels of the asset management spectrum. Whereas
accounting provides a snapshot of an organization's financial situation using past and present
transactional data, finance is inherently forward-looking; all value comes from the future.
What are important basic points that should be learned to pursue a career in finance?
• 1. Interpersonal Skills
• There was once a time when financial professionals were bound to an office, attached to a cubicle.
However, nowadays, interpersonal skills are more important than ever. Workers are required to deal
with people every day, constantly attempting to build successful relationships with co-workers and
customers. If you want to excel in the financial field, being friendly and approachable is a big part of the
job requirements.
• 2. Formal Qualifications
• When pursuing a career in finance, there are a few things that can set you apart from the rest. While in
some industries, hands-on experience and a dazzling personality can be enough to get you through the
door, finance requires a little more paperwork. Because rigorous processes and standards rule the
sector, formal accounting qualifications are desired. Whether that is studying a TAFE course, degree,
certificate or diploma – education is as important as your expertise when securing a career in finance.
• 3. Problem Solving Skills
• When working in finance, no two days will look the same. While it is important to have adequate
knowledge of systems and processes, it is also essential to have the skills to tackle complex problems
as and when they arise. Whether it’s addressing the financial dilemma of a business, or tackling a
client’s tax dilemma, employers rely on employees that will pull through at challenging times. A good
finance candidate takes action to find solutions.
• 4. Analytical Skills
• Some of the most influential leaders in finance have the ability to think laterally, analysing scenarios
and drawing suitable conclusions. They embrace and utilise this part of their role, demonstrating their
ability to think in logic and order. This is an extremely important skill to have as a finance employee, as
your job will require you to be well versed in rationality and putting emotion aside to come through with
an adequate solution.
• 5. Technologically Savvy
• Technological advancements have made waves in the financial industry. Not only have they made
streamlining time consuming processes a breeze, but they have also increased speed and productivity
in the majority of business practices. With this being said, financial professionals must place tech skills
at the forefront of their learning. They must have knowledge in the most up to date programs, going
above and beyond to excel in the specific tools and platforms that are relevant to the industry. Without
this knowledge, you will find yourself falling behind and becoming less of an asset to the finance
industry around you.
• 6. Desire to Innovate
• While a career in finance may be traditionally associated with routines and systems, this does not mean
there is no place for innovation. Productivity drives this industry, always looking for new ways to
achieve and complete things. This is where you come in. Your innovation can streamline processes to
speed and accuracy, helping to save time and money within your organisation. These efforts will help
your career in leaps and bounds, showing that you are constantly pushing yourself to think outside the
box.
• 7. Relationship Management Skills
• When people come to see you, it’s because they have issues with money. In order to succeed as a
financial professional, you need to retain a level of sensitivity and professionalism in your relationships.
This comes with the territory, and also your ability to understand different personality types. You must
ask the right questions, work to resolve conflict, as well as constantly educating and counselling clients.
Clients require an unbiased advisor who can still remain sensitive, understanding their needs and
assisting in financial decisions.
• 8. Exceptional Leadership
• The most coveted and respected financial professionals are those that drive themselves forward
through leadership and motivation. While you may not be in the highest management position, even
entry-level financial jobs require a high level of leadership. Everything you do sets a foundation for
those around you. From general project management, to spearheading team activities – these are the
things that set you apart from the rest.
2. What is project finance? How is project finance different from corporate finance? Why can’t we put
project finance under corporate finance? Define 20 terminologies related to project finance.
• project finance
• Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public
services using a non-recourse or limited recourse financial structure. The debt and equity used to
finance the project are paid back from the cash flow generated by the project.
• 2. Assets: Assets are items you own that can provide future benefit to your business, such as cash,
inventory, real estate, office equipment, or accounts receivable, which are payments due to a company
by its customers. There are different types of assets, including:
• 4. Balance Sheet
• A balance sheet is an important financial statement that communicates an organization’s
worth, or “book value.” The balance sheet includes a tally of the organization’s assets,
liabilities, and shareholders’ equity for a given reporting period.
• 5. Capital Gain
• A capital gain is an increase in the value of an asset or investment above the price you
initially paid for it. If you sell the asset for less than the original purchase price, that would be
considered a capital loss.
• 6. Capital Market
• This is a market where buyers and sellers engage in the trade of financial assets, including
stocks and bonds.
• 7. Cash Flow
• Cash flow refers to the net balance of cash moving in and out of a business at a specific
point in time.
• 10. Depreciation
• Depreciation represents the decrease in an asset’s value. It’s a term commonly used in accounting and shows how
much of an asset’s value a business has used over a period of time.
• 11. EBITDA
• An acronym standing for Earnings Before Interest, Taxes, Depreciation, and Amortization, EBITDA is a commonly
used measure of a company’s ability to generate cash flow. To get EBITDA, you would add net profit, interest, taxes,
depreciation, and amortization together.
• 12. Equity
• Equity, often called shareholders’ equity or owners’ equity on a balance sheet, represents the amount of money that
belongs to the owners of a business after all assets and liabilities have been accounted for. Using the accounting
equation, shareholder’s equity can be found by subtracting total liabilities from total assets.
• 13. Income Statement
• An income statement is a financial statement that summarizes a business’s income and expenses during a given
period of time. An income statement is also sometimes referred to as a profit and loss (P&L) statement.
• 14. Liabilities
• The opposite of assets, liabilities are what you owe other parties, such as bank debt, wages, and money due to
suppliers, also known as accounts payable.
• 15. Liquidity
• Liquidity describes how quickly your assets can be converted into cash. Because of that, cash is the most liquid
asset. The least liquid assets are items like real estate or land, because they can take weeks or months to sell.
• 19. Valuation
• Valuation is the process of determining the current worth of an asset, company, or liability. There are a
variety of ways you can value a business, but regularly repeating the process is helpful, because you’re
then ready if ever faced with an opportunity to merge or sell your company, or are trying to seek funding
from outside investors.
• mezzanine finance
• Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity
interest in the company in case of default, generally, after venture capital companies and other senior lenders are
paid.
• Mezzanine debt has embedded equity instruments attached, often known as warrants, which increase the value of
the subordinated debt and allow greater flexibility when dealing with bondholders. Mezzanine financing is frequently
associated with acquisitions and buyouts, for which it may be used to prioritize new owners ahead of existing
owners in case of bankruptcy.
• an example of a mezzanine
• Some examples of embedded options include stock call options, rights, and warrants. ... For
example, a private equity firm may seek to purchase a company for $100 million with debt,
but the lender only wants to put up 80% of the value, offering a loan of $80 million.
4. Explain in detail with reasons of what the sectors are or which type of projects are suitable for
project finance?
• These characteristics are usually linked to companies that are active in the infrastructure, energy,
renewable or utilities sectors, to name a few, engaging in the development of projects that require an
especially costly initial investment and which are depreciated over very long periods of time, such as
such as roads, power plants, vehicle park lots, airports, wind farms, refineries, etc.
• Advantages and disadvantages
• Revenue stability and predictability is precisely what makes it possible to consider financing structures
subject to maturity and leveraging terms that exceed the terms that a corporate structure with a
comparable credit rating could ever opt to. The appeal of longer terms and the higher volume of the
loan offset the potential drawbacks of project finance structures, such as higher costs and more
complex and lengthier closure processes.
• In terms of financing deadlines, they can be extended considerably, up to 30 years for the highest-
quality risks. Also, leveraging can reach levels impossible to match in corporate financing operations,
with some cases exceeding a 90:10 Debt-Capital ratio.