Bloomberg Assessment Test
November 20, 2010 52 Comments
Here is everything you’d want to know.
BAT is well-intentioned as it does give a chance to set a level playing field for students from different universities. At least at the companies that are going to put some weight on these test scores. But that depends on if/when the BAT goes live, if/when it gets some acceptance and if/when students nailing the test also do well at the job..
BAT flyer claims that no preparation is required!! Oh well, I think they meant no prep required for this beta field test, as the scores don’t matter..maybe.. but yeah they do have a body of knowledge they cover, so there is a lot to prepare.
….and I am sure there will be 100s of test prep books flooding the market once BAT goes live.
BTW based on kind of questions that appeared in the test, I wonder how the science and other undergrads are going to do well without prep.
Unless the test is different for students with different backgrounds, but then…. whats the point?
So assuming its all standard ( well they have not claimed it to be a standardized test btw), here is what you need to know.
Most concepts are covered in our finance and related courses and the question are centered around those concepts. There are many trick questions to test your grasp of concepts. There are many confusing choices. As with any standardize test, need to be careful reading the question.
The test is divided into following sections, I attempt to highlight the concepts covered in the tests as far a I remember.
Supply function, demand function, equilibrium, price function, relations, curves, marginal costs, opportunity costs, externalization, internalization, global trade, GDP, GNP, balance of trade, trade deficit, monetary policy, fiscal policy, economic value, monetary value, real values and nominal values, inflation and its effects and prevention, deflation and its effects and prevention. Role of governments, role of federal banks, sovereign debt, national debt, exports, imports and currency valuation.
Know leading economic indicators.
There are few questions that need calculations. You can only use calculator in your computer, hope they allow a regular calculator in real tests.
Financial Statement Reporting and Analysis:
Know your accounting. Balance sheets, Income statements and cash flow statements.
Know your ratios. What items on BS and IS affect those ratios and how ( up/down/no change)
Know What item goes where ( which statement) and how it affects other items on same or other statements.
Net working capital and what affects it.
Retained earnings and what affects it.
Don’t think there were any calculations in this section.
This seemed like the biggest topic of the exam. May be because valuation questions were also covered in other sections of IB.
Know different valuation methods, DCF, comparable, LBO etc. Which is preferred when. What information would you need for each of those valuation methods.
Know DCF concepts in detail, FCF analysis, discount rate, WACC, cost of debt, cost of equity.
Understand clear differences between EBIT/EBITDA/Operating cash flow/free cash flow and operating income/ gross income/ net income
Total Enterprise value. ( V=E+D-C)
Standard ratios used in comparable methods, which is best in any given situation.
Start up valuation, valuation of firm with no growth but good cash flow etc etc.
Investment Banking – Corporate Finance and Financial Advisory , Investment Banking – Capital Markets Issuance / Syndication, Investment management
Bond markets, equity markets. If you are investor or advisor to your clients.
What affects bond markets. What affects equity markets.
What is LIBOR, Fed fund rate, prime rate e.t.c
Money markets, commercial papers, treasury bills.
Chapter 2 of Investments is a good read.
Capital market questions. debt and equity
Risk & returns, how to diversify risk, unavoidable risk, risk that cannot be diversified etc.
Note: Systematic risk cannot be divesified; Idiosynchratic risk can be diversified away.
Idiosynchratic risk that canont be diversified away is a diversification measure of a portfolio.
( CAPM, FAMA FRENCH model)
Mutual funds, hedge funds, index funds.
Portfolio theory, and IB concepts, Role of IB,
IPOs. What is some IPO buzz works, pitching etc etc
Understand whole process in detail and then more. There are many questions related to IPO.
Questions mostly around currency exchange rates, fluctuations.
Know global indices names
Verbal Skills : Read very small essays or news excerpts: Analyze what kind of writing it is.. Arguments, facts and examples, chronological event description etc etc
Math Skills : Use calculator you should be fine. Nothing surprising here.
Situational Judgment : Mostly you are worked up what would you do kind of question. Office situate with boss/ co-workers/new employees, c levels etc
Ethical Reasoning: just 1 question. you will have to be from another planet to screw this.
Tasks : Some event or news is given . You are a trader trading in money market/ bond market/equity market/ option market, what your reaction will be to those events, news etc.
UPDATE: If you have access to Bloomberg terminal, make yourself familiar with it, as most of the questions would show you the snapshot from the terminal and for the first timer the information on the screen could be overwhelming.