How To Prepare For The Investment Banking Interview

It seems that the investment banking industry has narrowly escaped Armaggedon and the survivors are waiving the bonus flags again. Intern classes are getting bigger and Business Week reported that Goldman Sachs has reclaimed the top spot as the most popular employer among elite MBA students again. If you are a career switcher and one among many MBA applicants dreaming of joining Goldman Sachs or another bulge bracket investment bank for the summer internship, this article is for you. Below we provide an overview of an investment banking interview and explain why it’s important to prepare in advance. This is especially true if you are a career switcher.

There are several types of questions which you are likely to be asked in your interview. They include career questions, educational questions, competency questions, fit questions, technical questions and industry questions.

While it’s difficult to predict which questions exactly you will be asked, there are four questions which will appear in any investment banking interview:
- The WMTYR (Walk me through your resume)
- The 3 Why's (Why investment banking? Why our bank? Why (should we hire) you?

The answer to the first and the second questions may be quite similar to those you provided in your MBA admission interviews. Answer to the third question is a little bit more complicated and will require specific preparation.

The usual reason for interest in any specific investment bank include: (a) a strong platform, which means strong coverage teams, diverse offering of advisory and financial products, many interesting deals and opportunities to learn (b) a strong presence in specific markets or industries (c) and the most important, tons of wonderful and smart people with whom you talked with during your recruiting process and whom you really made a connection with. Networking is a critical component for your interview preparation but we will discuss this area in one of our
future postings.

Why (should we hire) you? To answer this question you need to reiterate your main strengths, interest in a specific bank and a great fit you feel for the bank you are interviewing with.
You should prepare for this question especially well as a bank’s approach to this question will usually be that a person who cannot sell himself cannot sell the bank’s products and banking is definitely a sales job.

Good to know Other challenging fit questions examining your understanding of the
investment banking can be:
- What does an investment banker actually do?
- What is the role of an associate in the investment banking?
The answer to the first question will usually go in the following way:
• An investment bank serves as intermediaries between their clients
who need capital in the form of debt and equity
• It provides strategic advisory services by structuring transactions
that meet clients needs and objectives
• Overall, Investment bank works with companies on the transactions
that will enhance their value. This may include accessing capital
markets to find growth or expand operations, as well as investing in another
company through merger or acquisition. Banks are not only the
matchmaker between parties involved in a transaction, but also the primary
architects of the deal.

A typical answer to the question about the role of an associate will
go like this :
• Analyzing industry and company data related to the transaction
• Building excel models to valuate companies
• Joining strategic meetings
• Performing due diligence meetings with the clients
• Creating, editing client presentations
• Monitoring, paying close attention to documentation associated with
the deal (prospectus, internal memos)
• Managing relationship with an analyst
The most important attributes that an associate should have are:
quantitative skills, the ability to learn quickly, discipline, a strong work ethic, the ability to
work in teams, detail orientation and dependability.

While answering competency and behavioral questions you should be structured and succinct. Banks like well organized and structured thinking and will quickly dismiss candidates who ramble or cannot distinguish important points from the less important ones. We recommend creating 3 bullet points for each of your answers and putting them on the paper in advance. Practice your answers with friends and be sure that your story is consistent and flows well before the interview.

The technical part

The technical part of the interview will test your familiarity with the accounting and financial terms. This will definitely require thorough preparation even if you study at one of the top MBA programs . First of all you will need to be familiar with the financial statements and their analysis. The profit and loss statement, the balance sheet and cash flow statements are all fair game in the interview.
Secondly, you will need to have a basic understanding of the company's valuation methods. You should be very familiar with terms such as cost of capital, cash flow discounting, multiples, accretion and dilution, LBO, CAPM, WACC and Beta.

You also may be asked how M&A and IPOs work and even be given a case study on a business situation. It is strongly recommended that you start b-school having at least a basic understanding of accounting and finance.

Here are some books that can help you.
• VAULT Guide to Finance Interviews by D. Bhatawedekhar, Dan Jacobson,
and the Vault Staff
• Vault Career Guide to Investment Banking by Tom Lott, Derek Loosvelt
and the Staff of Vault
• Heard on the Street by Timothy Falcon Crack.
• Valuation: Measuring and Managing the Value of Companies by Tom
Copeland, et al, John Wiley & Sons Inc
• Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
• Financial Modeling, 3rd Edition (Hardcover), Simon Benninga

In the industry part of the interview the interviewers will test your understanding of the industry and your professional interests.
You will be asked about financial news and trends, current articles related to investment banking, discussions of the economic environment and economic trends, trends in M&A and definitely about specific deals.

To be prepared for this part of the interview it’s advisable to start reading financial and economic newspapers and journals. The Wall Street Journal, FT and Economist are good sources to gain relevant knowledge.

A couple of additional hints:
- Know recent interesting deals executed by banks with which you are interviewing.
- Talk about deals with passion – the interviewers will test not only your level of knowledge but also your passion for IB
- And finally, always read the news in the morning before your interview

Some additional books to better understand investment banking before your interview include:
• The Business of Investment Banking: A Comprehensive Overview , by K.
Thomas Liaw
• Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley , by
Patricia Beard
• The Last Tycoons: The Secret History of Lazard Frères & Co. , by
William Cohan
• The Accidental Investment Banker: Inside the Decade that Transformed
Wall Street , By Jonathan Knee
More entertaining books include:
• Barbarians at the Gate , By Bryan Burrough and John Helyar.
Bombardiers , By Po Bronson
• Monkey Business: Swinging through the Wall Street Jungle, By John
Rolfe and Peter Troob.
• Liars Poker: Rising Through the Wreckage on Wall Street , By Michael
Lewis, Norton Books.

Good luck with your interview!

Banking Jargon Buster - Banking Terms Explained

Many of us glaze over when we hear conversations about compound interest, prime lending rates or third party payments, but it’s worth understanding these terms as it can directly affect your wallet.
Many commonly used banking terms are misunderstood and this can lead to some costly mistakes. This guide will help to explain some banking terminology and make the language of banking easier to understand: 

Annual Percentage Rate (APR) - Annual percentage rates provide an indication of how much interest you will be charged on a loan. Usually, the higher the APR on a loan, the more interest you'll have to pay (assuming that all other things are equal). You can compare APR rates between different banks to get an indication of which is more expensive. If you are looking around for a loan, you usually want as low an APR rate as possible. However, you should also be on the lookout for other costs, such as administration fees, legal fees or penalties should you decide to settle the loan early.

Assets - Assets are everything you own that has any monetary value, plus any money you are owed. Assets include property, vehicles, equipment, savings, investments, the value of your life insurance policy and any personal items that you own. When you calculate your net worth, you subtract the amount you owe other people, or your liabilities, from your assets.

Annual Percentage Yield (APY) – This is the amount you earn on an interest-bearing investment in a year, expressed as a percentage. For example, if you earn R60 on a R1, 000 investment between January 1 and December 31, your APY is 6%. When the APY is the same as the interest rate on an investment, you are earning simple interest. But when the APY is higher than the interest rate, the interest is being compounded, which means you are earning interest on your accumulating interest – a good way to make your money grow even faster.

Account Balance - Your account balance is the amount of money you have left in your bank account after all deposits, withdrawals, interest and bank charges have been taken into consideration, this will be your net balance.

Available Balance – The account balance may be different from the balance that is available to the account holder for spending, withdrawal or transfer. If a cheque has been deposited, but not cleared by the issuing bank, the funds will not be available to the account holder even though they may show up in the account's stated total balance. For example if your total balance is R5000, but only R4500 is available to you, then R500 is waiting to be cleared. The transaction is still in progress at the time that you requested a balance enquiry.

Cheque Account – Also known as a transmission or transactional account, a cheque account is a bank account that is used to deposit and withdraw money. Money can be added or removed from the account by visiting the bank branch, using an ATM or Internet banking or in the old-fashioned way, by writing a cheque. These days a debit card is usually issued to withdraw funds or make purchases from a cheque account. Some banks may require a minimum balance to open or maintain the account.

Compound Interest - Compound interest is calculated, not just on the original amount, but also on the interest that has already been earned. Compound interest can be frightening if you owe money as you’re being charged interest not just on the debt, but also the interest you owe. If you’re saving, it can be a tremendously powerful tool, as you earn interest on your savings as well as on all the interest you’ve earned. Without compounding, you earn simple interest, and your investment doesn't grow as quickly.
For example, if you earn 10% compound interest on R100 every year for 5 years, you'll have R110 after one year, R121 after 2 years, R133.10 after 3 years and R161.05 after 5 years - for total growth of 61.1% on your investment. With simple interest, you would have earned R10 a year for 5 years, for R150, or 50% growth. The R11.05 difference is the effect of compounding. Compound interest earnings are reported as annual percentage yield (APY), though the compounding can be calculated annually, monthly or daily.

Credit - Credit is the promise to pay back the value of something purchased without initial full payment. A contract or credit agreement is drawn up to describe the agreed terms for paying back the money borrowed, including time to pay, monthly payment date, interest rates and possible fees. A formal evaluation of your credit history is checked before credit is granted to you by a financial services provider.

Credit Card - A credit card is a plastic card, with a magnetic strip or an embedded microchip, connected to a credit account and used to buy goods or services with a promise to pay later. As this is considered a possible risk to credit lenders, an interest rate is charged on top of the amount you are paying for the goods or service. With a credit card, you will receive the item immediately after the cashier has swiped the card and the transaction has been successfully processed, but the merchant will only receive payment from the issuing credit card company within 30 days of the purchase. At this time, you will also receive a statement from the bank, indicating the amount owed. You will need to make at least a partial payment towards paying off the debt, and will be charged interest on the amount you do not repay. A major benefit of a credit card is that it allows you to make a purchase even when you do not have the full amount available in cash.

Credit Rating - Your credit rating is a formal evaluation of your ability to pay interest and repay borrowed money, as published by a credit rating agency or service.

Credit Check - A credit check is a review of your credit history made by a lender or other financial services provider when you make a credit application. The result of a credit check (i.e. it shows whether you are a good or bad credit risk) will affect the decision of the lender. For example, if the credit check shows that you are a bad risk, any loan you are offered will probably involve a smaller loan amount and a higher interest rate.

Debit Card - A plastic card linked to a bank account. The card, like a credit card, can be swiped at a tillpoint to pay for a purchase or used to withdraw cash from an ATM machine. When cash is withdrawn or a purchase made, the money is immediately deducted from the cardholder's account, so it requires funds to be available in the account. Most banks charge bank fees each time the card is swiped at a retail outlet or when money gets drawn at an ATM.

Fixed-rate Loan – A loan with a set rate of interest that either does not vary for the entire life of the loan or is fixed for a specified period. This can be particularly useful if interest rates are increasing, as you can set the interest rate you pay regardless of what happens to interest rates during the period of the loan.

Floating / Variable-rate Loan - A variable-rate loan means that the interest rate you are charged will change according to the increasing and decreasing movement of interest rates. The advantage of a variable-rate loan is that when interest rates are low your repayments will be low. If interest rates rise however, your repayments will too. In the case of a variable-rate loan it’s wise to make sure you don’t borrow more than you could afford to pay if the rate were to rise.

Interest - Interest is the amount paid or charged on money over time. If you borrow money, interest will be charged on the loan. If you invest money, interest will be paid to you (where appropriate to the investment). Interest rates are expressed in percentage terms.

Prime Rate - A benchmark interest rate which banks use to calculate the rate at which to lend money to creditworthy clients. As a general rule, the higher the client’s risk, the higher the interest rate the banks will charge above prime. It’s one of the reasons why it’s worth maintaining a good credit record.

Overdraft - A prearranged facility that allows bank accountholders to have a negative balance on their bank accounts – thereby effectively borrowing money from the bank. Generally, you will be charged a set fee for the provision of an overdraft facility. This fee is often calculated as a fairly high percentage of the total value of the overdraft.

Savings Account - A bank account where you can put away money for later use, either in a lump sum or on a monthly basis and there are 2 options: fixed-term or flexible savings accounts. Savings accounts are useful for building up funds for unforeseen expenses, such as car repairs, or for a particular goal, such as tertiary education or an overseas holiday. They can also be used to accumulate money for an investment that requires a larger sum which you do not yet have.

Fixed-term Savings Account – Also known as a fixed deposit, this is an account in which the deposit is held for a fixed-term or in which withdrawals can be made only after giving notice. Most banks would offer a higher interest rate for leaving the money untouched for a longer period.

Flexible Savings Account – This account has the option for you to withdraw funds whenever you need it, but earns a slightly lower rate of interest for the flexibility.

Debit Order - An arrangement whereby you give a third party permission to regularly debit your account, for example to pay a cellphone contract. The amount may vary each month and the debit order lasts as long as there is a contract between you and the company debiting your account. Debit orders can only be used if the company is authorised by the bank to use the debit order system. A debit order must be amended or cancelled on request from the third party who is debiting the client’s account.

Stop Order - An arrangement between you and the bank to pay a third party a fixed amount every month, at specified intervals for a certain period as stated by the client for example rent payments to a landlord. Stop orders cost more than debit orders to set up because the bank has to do more administrative work. However, because you are in control of the order, it is a safer route as the third party has no control and cannot increase your payments without warning. A stop order must be amended or cancelled on request from the client’s bank.

Third Party Payment (Transfers) - Technically, both stop orders and debit orders are ways to make third party payments, but nowadays the term is mainly used to describe making payments via the Internet or at an ATM. The person or company you are paying is called the beneficiary. Most Internet banking sites allow you to load beneficiaries yourself, either as a once-off or regular payment. Paying beneficiaries online is more cost-effective than using a stop or debit order and gives you more control over your finances.

Choosing Credit Cards: Where To Start

Lack of choices is definitely not a problem when looking for a credit card. The problem is actually the reverse. There are so many credit cards offered by so many different banks and credit card companies that choosing the one with the best tv ad or nicest freebie often ends up the deciding factor for people who just don’t want to bother having to compare the overwhelming number of choices.

When choosing a credit card, however, it stands to reason that you really do not have to compare all the credit cards available in the market. To make narrowing down the choices an easier task, instead of comparing each credit card, it is a good idea to start by comparing the banks and credit card companies offering the credit cards. The reason for this is that by narrowing down your choices to credit cards offered by a bank or two, you will have had slashed the number of cards to compare drastically. And since the quality of products and services that a bank offers will reflect on the cards they offer, then you can be pretty certain that, barring several great credit cards from other banks that are overlooked, you will have a good number and variety of top credit cards to choose from.

When choosing a bank or credit card company, it might be very tempting to automatically go with your existing bank; after all you already know their quality of service and trust them enough with your other banking needs. While this might be a good idea in some cases, you should also keep in mind that you are looking specifically for the banks that offer the best credit cards. This means that if your bank’s strength is in its great savings or investment products, its focus might not be on credit cards. So be sure to compare banks according to their reputation for credit card services.

Do not rely solely on advertisements. Remember, advertisements are there to entice you. Instead, ask around. Ask people who actually own credit cards from different banks. Ask them about their experience with the bank. Did they get charged with any surprise fees? Do fees and interest rates change drastically and frequently? Ask about the level of service. How easy is it to get hold of them on the phone? How friendly and knowledgeable are their customer service representatives? Have they ever filed a dispute and what happened? Do they have an international presence?

Find out the things that would really matter once you have the credit card in your hands. Only when you have narrowed down the banks should you take the next step, which is to compare each card according to the introductory rates, APR, and extra features such as security, online credit cards services, and rewards system.

Exploring Top 10 Business Sectors In India

The Indian economy is one of the fastest growing economies in the world and this is evident from the increase in b2b business space India shares with the world. Apart from the big business houses, the real contributors towards the economic growth are the small and middle sized enterprises belonging to different industries. 

To learn about different business sectors of India, there is no better place than a b2b
business directory, where these businesses open their doors for the world. Considering the popularity and growth rate of businesses, here is a list of the top 10 business sectors of India.

Foods and Beverages
The foods and beverage industry of India has gained popularity in the past 3-4 years, mainly due to the changing lifestyle and eating habits of the people. Most of the segments have recorded an increase in revenue from 2005 to 2009, the alcohol segment being on the top. A growth rate of 7.5 percent is expected between 2009 and 2013 to make it a 330 billion dollar industry by 2013.

IT Industry
The information technology business sector of India is expected to increase by 14.1 percent from 2009 to 2010. The expert analysis predicts the industry to become 67 billion dollar industry in 2010 and to increase by 11 percent by the year 2013. IT services, software as well as hardware segments are making great contributions towards the growth rate of IT industry as a b2b business.

Health Industry
Due to a huge different in the healthcare costs in India and the western countries, the health industry of the country is experiencing a growth in terms of business. The analysis shows that the current 35 billion dollar industry is going to touch the figure of 75 billion dollars in 2012 and 150 billion dollar by the year 2017.

Telecom Industry
The growth of telecommunication business sector in India can be easily termed as a revolution. The country enjoys the second rank as the telecom network provider. The rise of 3G services and mobile telephony has also contributed significantly towards the growth rate in the sector. The mobile subscribers in the country are expected to grow by 11 percent from 2010 to 2014.

Textile Industry
Textile industry of India is a globally reputed b2b business sector. The total textile exports from India contribute towards 27 percent of the total foreign exchange. Cotton, silk, jute, woolen, hand-crafted and readymade textiles are the main segments one can find in a global Indian b2b business directory.

Auto Industry
The Indian auto component industry has been growing with a consistent growth rate of about 20 percent since 2000 and the rate is expected to remain consistent till 2015. Engine parts, drive transmission ad steering parts, suspension and braking parts and electrical parts are main contributors towards the growth of this global b2b business sector.

Construction Industry
Accounting towards 11 percent of India’s total GDP, the construction industry is an exporter of various raw materials to the world. For example, China is the biggest consumer of steel exported by India. Besides, the cement industry is a significant contributor in this category.

Handicrafts
Indian handicrafts enjoy a great demand in the foreign markets like those of USA, UK and Australia. Wooden handicrafts, jewelry, hand printed textiles and crocheted goods are some of the main segments that bring foreign exchange of the worth of 3 billion dollar to the country.

Energy
Both renewable and non-renewable energy sources have contributed towards the growth rate of energy sector of India. Natural gas, LPG and solar energy are the segments that have been consistently growing.

Banking and Insurance
Investment banking, credit cards, mortgage and insurance products are the segments that contribute towards the growth of banking and insurance sector of India. For example, the number of debit cards increased by 40 percent from 2006 and 2009.

To find the companies showing growth in the above-mentioned business sectors, you can refer to a b2b business directory. Apart from them, there are many other industrial sectors growing in the domestic as well as global markets.

Pnc Bank Online Banking

The PNC Bank Online Banking service is offered by PNC Bank to its customers and account holders. This service enables the bank’s clients: 

To access their accounts from any where in the world.
• Perform various functions over the net itself, saving on time.

Features of PNC Bank Online Banking
PNC Bank Online Banking service is available for the bank’s customers free of cost. Following are the distinctive features of this service:

• Account Summary: You can remain in touch with your finances by obtaining a summary of your PNC personal, business and investment accounts through this service.
• Account Activity: You can access your accounts round the clock. You can check balances, review recent transactions and view images of the checks you have submitted.
• Online Bill Pay: You can save time and money by paying your bills through this service. Online bill payment requires just a few minutes of your time, with you using just one simple screen to place your instructions. This service gives you the flexibility to decide how much you want to pay for each bill.
• Online Statements: You can contribute on saving paper. You can use the PNC Bank Online Banking service to receive and view your statements online. You can also print or download statements for up to last 36 months.
• Transfer Funds: Through this service, you can move your money to where you need it. You can either transfer funds between your PNC Bank accounts or between your PNC account and your accounts at other financial institutions.
• AutoAlerts: You can use this facility to remain informed about every critical event related to your accounts and bills. This service can send you e-mail notifications to alert you about key account activity such as low balances, the arrival of direct deposits or overdrafts on your account.
• Data Export: This facility in the PNC Bank Online Banking service enables you to download account activity in Excel, Microsoft Money or Quicken file formats in just a few clicks.

Going Public Sale: On Funding A Growing Business

From rags to riches! When your business success was a blast and you are thinking of a big office, branches, manufacturing plants or distribution outlets, and purchase more equipment, a large amount of money is needed.

Sizeable sums of money for marketing may be needed to meet increased competition. For instance, you would like to transfer your card printing company to a bigger office that would accommodate your large business cards printing equipment. You have to advertise for the new office for your customers. And since you have transferred to a new unknown place, and worse, you are now, again, unknown to your customers, you should seek your advertising firm to help you with this. And as your card printing business grows, you will be lined up and compared to other similar businesses with your level.

The large amount of money you will need for expansion, advertising, among others, are usually sought from such sources as public sale of stock or merger. You can cut the price of your business cards that are not sold and other cards that has plenty of stocks left. You can sell it with 50 percent off the price; or you can also use the buy-one-get-one-free scheme.

Public sale of stock is also a viable alternative for raising capital when the business has a well established track record. The public equity offering sometimes has the dual purpose of raising additional funds for the company and enabling original investors to realize a financial gain by selling a portion of their shares. The expenses involved in “going public” are significant. There are legal and auditing expenses as well as the cost of good placement services – the reputable investment banking firm that agrees to underwrite or sell the stock offering. Often these costs can amount to 20% or more of the total proceeds of the stock sale. The company will have to devote a lot of its efforts to maintain good relations with its stockholders and the Securities and Exchange Commission. There will be strict disclosure and reporting requirements. And if the company does not perform well with its equity capital, additional public financing will be out of the question.

On the other hand, sale of public stock can net the company more debt-free funds than, say venture capital firms can supply. Going public will often produce a higher stock than selling stock to a single buyer.

Expanding markets, new technology, and the need to diversify often mean that large infusions of cash will be needed beyond the company’s own resources and credit available from financial institutions. A public offering of stock permits the owner to retain control of their company while reaping the benefits of an increasingly valuable equity position if growth continues. But it should also be noted that buyers of stock in a public offering look primarily at the potential for capital gain rather than dividends. This means that for the stock offering to be attractive, the company’s growth record must far exceed the industry average.

In addition, going public alters the character of the company and changes the way the entrepreneur is accustomed to operate. Profit margins, market share, and other information may have to be disclosed, which could affect the firm’s competitive position. Stockholders, analysts, auditors, and brokers will also want access to information and will feel they have a right to question a variety of decisions and actions the management has made. The effect is that the closely held company accustomed to a low profile and free-wheeling operation now becomes accountable to many outsiders.

Mba Salaries And Working Hours – Numbers You Must Know

MBA salaries are a key factor which MBA candidates consider when selecting a business school. In this article we provide information about current MBA salaries as well as an analysis of working hours and hourly wages for various MBA job functions. 

According to the QS TopMBA.com International Recruiter Survey 2009, despite the recession, or perhaps because of the need to restore their reputations amongst top MBA candidates, banks in the US offered the highest total compensation to MBAs in 2009 at $130,000, ahead of Consulting - $120,000, IT - $120,000 and Energy - $118,000. All sectors, apart from Defense, Government and Transportation, offered total compensation ranging between US$100-140,000.

Salary stagnation was a major concern for candidates this year as the gap between supply and demand widened. Recruiters have the bargaining power to determine how many jobs they will post and at what level they will set MBA starting salaries. However, employers surveyed stated that they planned to maintain salaries at 2008 levels.

According to the report, Western European salaries have been relatively stable since the dot.com crash. In reality, an MBA graduate today will face similar prospects on either side of the Atlantic. Salary levels in financial services and consulting are very similar in both regions as are technology salaries and those in general industry. The recent strength of the US dollar means that average European salaries reported in US dollars have fallen this year to $87,000, but in Euro terms they have remained stable. There is a great variation in salaries across the region. The United Kingdom, France and Switzerland are paying the highest MBA salaries, all with averages of $100,000 or more, well ahead of the regional average. MBA salaries in Germany and the Netherlands have dropped back below the average for the region, though this may be explained by the fact that fewer (and a higher proportion of smaller) companies in these countries have responded to the survey this year.

Because of fluctuations in the exchange rate, MBA salaries by sector, in US dollar terms, have dropped this year. Consulting offers are averaging $92,000. Financial Services offers are averaging $89,000 (these figures exclude bonuses). The highest salaries have been offered by IT/Computer services companies, which average $95,000.

The average first year bonus guaranteed for new MBA hires across North America/Western Europe in 2009 was US$21,700 - down compared to the 2008 figure of US$26,875. This bonus, which is typically used to repay school fees, is the area of MBA compensation employers have felt most comfortable cutting during times of recession.

The average reported bonus ranges between US$0 and US$40,000 depending on the industry sector. Banks are still reporting the largest average bonus at US$37,500, only slightly down from the previous year.
The Energy sector is also offering bonuses in excess of $30,000, probably caused by their need to compete with banks and consultants to attract top talent.
The Consulting sector is offering slightly lower bonuses of $28,000 on average, compared with the previous year.

The sectors which have reduced MBA bonuses the most are: manufacturing (down from over $30,000 to $20,000) and high tech (down from over $30,000 to $22,000).
MBA bonuses have tended to be volatile in the past and it may be that if MBA demand bounces back in 2010, so will these average bonuses, says the report.
It is important for candidates to understand the fiscal status of their bonus. Maximizing after-tax bonus value should be prioritized: in some US states, bonuses are taxed at nearly 50%. In the UK, relocation expenses and tuition reimbursements can be claimed tax-free. In such cases the cost is the same for the recruiter, but the benefit far greater for the candidate.
Furthermore, an up-front starting bonus carries greater value than a year-end or performance bonus. Candidates can compare their offers with their peers to ensure they are getting a competitive offer and communicate this benchmarking to the recruiter. In at least one case, a top-tier consulting firm has increased its offer for the entire entering MBA class in order to match competitors. No MBA graduate can count on the promise of a performance bonus, making financial planning, including meeting minimum loan repayments, more difficult.

Performance bonuses, whether tied to individual, team or company performance, are a means for an employer to introduce variable compensation and to ensure they do not make financial promises they may not be able to keep the report says.
While MBA salaries is an important factor in understanding post MBA career options, it’s not less to understand what working hours you will be expected to commit. Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors, a research piece published in January 2009 by Chicago Booth and HBS researchers1, shows that weekly hours are high for almost all MBA positions. Hours are highest in investment banking and consulting. The average investment banker puts in a whopping 74 hours per week, the average consultant 61 hours per week. Also reaching close to the 60 hours per week mark are those employed in venture capital and sales and trading.

Mean earnings by gender are comparable directly following MBA receipt but they soon
diverge. Women earn $115K on average at graduation and $250K nine years out; men earn
$130K on average at graduation and $400K nine years out. Median salaries by gender also diverge in favor of men with years since graduation but not by as much as do mean salaries. The median female MBA starts her career at the 34th percentile of the male distribution but after 15 years has fallen to the 19th percentile. ZoomInterviews will explain this phenomenon in one of our following posts.

Finally to complete this analysis and provide more comparable information we combined the salaries statistics by function collected by the University of Chicago Booth School of Business and working hours statistics reported in the Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors report1. This data does not include year-end performance bonuses because of high variability of this item.
Despite a perception of high salaries in investment banking, in reality, hourly wages for this industry were the lowest among all MBA jobs. Investment bankers work approximately 74 hours per week and receive $34 per hour. However, higher performance bonuses in investment banking compensate for this gap. According to our calculations, in order for the hourly rate to equal that of other job functions, the minimum annual bonus would need to reach about $45,000.
The hourly rate in other MBA job functions can vary from $42 to $46, while working hours vary from 61 hours per week in consulting to 50.8 hours per week in operations.
We would advise MBA applicants to consider a range of factors including future salaries, bonuses, life work balance and general career potential in choosing their post-MBA career. However, while these considerations are important, in our view the most important factor in making your career decisions is doing what you really like. This is especially true when you know that the per hour wage, at least in your first few years after graduation, will be the same in most job functions. While salaries in various job functions may diverge in the following years, the chances that you will earn more in a job that you don’t enjoy are not very high and it’s highly questionable if the money is worth the sacrifices that you will make on the personal level accepting such a job.

1) Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors, January 2009, Marianne Bertrand (University of Chicago Booth School of Business, NBER, CEPR and IZA) Claudia Goldin (Harvard University and NBER) Lawrence F. Katz (Harvard University and NBER)