Finance U — Issue #3

Welcome to the 3rd Issue of Finance U — July 7th, 2025

📈 Wall Street & Beyond

Trade Tensions Rattle Global Confidence

The U.S. issued tariff warning letters to over 100 countries, many of which are tied to the BRICS economic alliance (Brazil, Russia, India, China, and South Africa), signaling that import taxes could rise to 50–70% by August 1. While new trade deals with the UK and Vietnam helped calm markets temporarily, global leaders are racing to strike more agreements before the deadline hits.

Why it matters: Trade policy has ripple effects across nearly every sector. Increased tariffs can raise costs for companies and consumers, weaken global partnerships, and spike market volatility.

Student Takeaway: Don’t overlook trade headlines. They’re more than political noise; they affect the economy, corporate earnings, and even what you pay at the store.

Stocks Hit New Highs, But Risks Remain

The S&P 500 and other major indexes recently reached all-time highs, supported by strong earnings and steady Fed policy. But behind the rally, some analysts warn of stretched valuations. The S&P’s forward P/E ratio is hovering around 22, and long-term indicators like the Shiller P/E and Buffett Indicator suggest the market might be overvalued.

• Shiller P/E looks at inflation-adjusted average earnings over the past 10 years to smooth out ups and downs, giving a clearer picture of whether stocks are fairly priced over the long term.

• The Buffett Indicator compares the total value of all U.S. stocks to the country’s GDP. When the market is much larger than the economy, it can signal that stocks are expensive and might be due for a correction.

Why it matters: Just because stocks are rising doesn’t mean they’re fairly priced. Overvalued markets can lead to sharp corrections when sentiment shifts.

Student Takeaway: Market highs can be exciting, but stay sharp. Learning to spot valuation risk now will help you make better decisions later, whether you’re managing your own portfolio or analyzing companies in a future internship.

🧠 Finance 101: The Cashflow Statement (CFS)

What to know

The cash flow statement shows how cash moves in and out of a company over a set period, usually a quarter or a year. It’s one of the three core financial statements, along with the income statement and balance sheet, which we covered in previous issues.

Think of it as the company’s “cash report card”. While the income statement shows profits on paper, the cash flow statement reveals the actual cash a company has to pay bills, invest, and grow.

Both the Cash Flow Statement and the Income Statement provide important information about a company’s financial performance, but they focus on different things. The Income Statement reports profits and losses over a period, showing how much revenue a company earned, its expenses, and the net income at the end. However, it includes some non-cash items like depreciation and changes in working capital, so it doesn’t reflect actual cash flowing in and out. On the other hand, the Cash Flow Statement tracks the real cash that moved into and out of the company, showing where cash came from and where it went.

Key sections to know:

• Operating Activities: Cash from the company’s main business operations. Examples include cash received from customers, cash paid to suppliers and employees, and interest or tax payments.

• Investing Activities: Cash used to buy or sell long-term assets. Examples include buying new equipment or buildings (Property, Plant, and Equipment, aka PPE), selling old machinery, or purchasing investments like stocks or bonds.

• Financing Activities: Cash raised from or paid to investors and creditors. Examples include taking out or repaying loans, issuing new shares of stock, buying back company stock, and paying dividends to shareholders.\

Why it matters: Even profitable companies can struggle without enough cash. The cash flow statement shows the real cash picture, helping investors and managers understand if a company can keep running smoothly.

Student Takeaway: When analyzing a company, always check the cash flow statement to see where cash is coming from and where it’s going. This skill is essential for internships, investing, and coursework.

🔦 Term Spotlight: Price-to-Earnings (P/E) Ratio

What to Know

The P/E ratio measures how much investors pay today for each dollar a company earns. It’s a simple way to see if a stock is considered expensive or cheap based on its current earnings. It’s calculated with this formula:

P/E Ratio = Current Stock Price ÷ Earnings Per Share (EPS)

You can find the P/E ratio on most financial websites or calculate it yourself using a company’s stock price and earnings.

Why it matters: A high P/E can mean investors expect strong future growth, but it might also signal that the stock is overpriced. A low P/E might mean the stock is undervalued or the company is facing challenges. Here is a quick key you can use:

• <10: Often considered undervalued or a value stock, but it could also signal trouble or slow growth.

• 10-20: Generally seen as fairly valued or average, typical for stable companies.

• 20-30: Indicates growth expectations; investors are expecting higher earnings in the future.

• >30: Could mean the stock is overvalued or priced for very high growth and might be riskier.

Student Takeaway: Think of the P/E ratio as the price tag for a company’s earnings. It helps you compare how “expensive” or “cheap” different stocks are, which is a key skill for investing and analyzing businesses.

💼 Prep Like a Pro: Mastering Behavioral Questions

Behavioral questions are a big part of interviews for finance internships and jobs. Recruiters want to see how you handle challenges, work in teams, and solve problems, not just test your technical skills.

Use the STAR method:

• Situation — Set the scene

• Task — Explain what you needed to do

• Action — Describe what you did

• Result — Share the outcome and what you learned

Be specific by sharing real examples from your experiences in school, work, or volunteering, and avoid vague or general answers. Practice common behavioral questions by preparing stories that highlight teamwork, leadership, overcoming obstacles, and time management. And don’t forget to show your passion by letting your genuine interest in finance and eagerness to learn come through.

Student Takeaway: Behavioral questions during interviews are your chance to show who you are beyond grades and resumes. Practicing your stories now will boost your confidence and help you stand out when it counts.

🧰 Toolbox: Resources to Reinforce Learning

🍿Watch: This video breaks down the Cash Flow Statement in simple terms, step by step. Taught by a former investment banker, it’s perfect for taking a deeper dive into the CFS if you're a beginner or just want a quick refresher on how it works.

📚️ Read: This article from VA Wizard further breaks down the STAR method and provides common behavioral questions you may be asked in Hirevues or interviews. Mastering your responses and delivering concise, compelling answers to these questions will make you memorable to interviewers and significantly increase your chances of landing the offer.

🔁 The Rundown

In Issue #3 of Finance U, we covered how recent market events like trade tensions and record equity levels are impacting investor sentiment. We broke down the cash flow statement, a crucial report showing a company’s real cash movements, and explained the P/E ratio, a popular metric for evaluating stock value. On the career front, we shared top tips for mastering behavioral interview questions to help you stand out and land that internship.

✝️ Verse of The Week

Proverbs 21:5 “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.”

Student Takeaway: Success rarely comes overnight. Careful planning, patience, and consistent effort build a strong foundation, whether in managing money, studying finance, or growing your career. Rushing decisions or chasing quick wins often lead to setbacks. Take your time making financial or career choices. Thoughtful planning and diligence pay off in the long run.

Thanks for reading the 3rd issue of Finance U!

Feel free to reply with feedback, share with a friend, or let me know what you would like to see in future issues.

-Wrigley Stevens