Insights

The world of private equity is notorious for grinding, 100-hour workweeks, particularly in the case of younger professionals. But like any job, there are always stretches where your firm’s deal flow (and urgent, need-it-done-yesterday work) slows down. That’s when private equity professionals may occasionally find themselves asking: how do I fill the hours between 9am and 6pm?

The three financial statements are the income statement, the balance sheet, and the cash flow statement. These three primary statements are intricately linked to each other, and understanding the relationships between them is critical to building a three-statement model, which is the foundation of most financial analysis.

Can you explain how the financial statements work together in under 60 seconds? This has been one of my favorite interview questions since I started working in private equity (except I don’t normally apply a time limit, that was included for internet attention spans). I have asked it of analysts and CFOs alike. The confidence and detail with which candidates answer it exposes a lot about their knowledge and how they think.

The goal of any search is finding a business to buy and run. But as anyone who has actually run a search can tell you, the process is much more marathon than sprint. This post provides a general overview of the day-to-day routine for most private equity searchers.

In this post we are going to explore the relationship between profitability on the income statement and cash generated through sales by taking a closer look at working capital. I think this is one of the most important relationships to understand, because a healthy business should have the capacity to fund some of its working capital needs through profits generated via the sale of its goods and services.