A traditional investment bank is composed of multiple divisions, including sales and trading and investment banking. The investment banking division is an intermediary between companies that need capital and clients wanting to invest capital.

Bankers advise clients that need capital or are planning a strategic action, such as a merger or acquisition. Bankers also help execute these strategic actions. Normally, the investment banking division is divided between industry, product, and capital markets groups.

Investment banks are frequently discussed and anlyzed in the financial press, especially during the current credit and financial crunch. This article reviews the structure and normal functions of typical investment banks.

Investment banks primarily have two functions. The first function is to raise and invest capital. The second is to advise clients on strategic actions, such as mergers and acquisitions. Investment banks primarily serve as intermediaries between companies that need capital and companies wanting to investment capital.

In addition, investment banks have been increasingly employing their own balance sheets to generate profits without directly serving clients through groups such as proprietary trading and internal alternative investment funds.

There are multiple methods investment bankers and other financial analysts use to value a company. One frequently employed relative value method is comparable company analysis. Comparable company analysis is especially useful when valuing the minority, non-controlling interest of a company.

Comparable company analysis is rooted in the idea that companies with similar characteristics should have similar valuation multiples. Typically, a group of comparable companies includes companies from the same industry as the company being valued and companies with similar fundamentals.

Damn, it Feels Good to Be a Banker is a satirical account of life as an investment banking analyst in New York at a top tier bulge bracket investment bank. The book is written by Leveraged Sell-Out, the author of the Leveraged Sell-Out blog. One disappointment is that Leveraged Sell-Out was not actually a banker, but rather a strategy consultant that lived with many banking analysts. Still based on my buy-side experience and the stories my banking friends have told me this book contains many underlying truths.

Jamie Dimon is the CEO of JPMorgan Chase, one of the few investment banks that has performed relatively well during the credit crunch. Below is a recent Dimon interview by Charlie Rose that focuses on the key current economic events.

(Part two of the Dimon interview begins at about 43:50)

Dimon states that he is not able to pick a bottom in this market. Many times guests on financial news shows like CNBC claim they can pick a bottom, but a common thread among great investors and financial leaders is …

Private equity firms have increasingly funded buyouts without using investment banks, but investment banks still add value to the private equity industry.